Lloyds (LSE:LLOY) shares continue to be some of the most popular UK stocks to own. They’re often found inside a vast range of professionally managed portfolios as well as personal ones. And it certainly sounds like a sensible investment on paper. After all, the bank plays a vital role in the British economy with also a trillion pounds worth of assets making it seem like a ‘safe’ pick.
But despite its popularity, has it actually been rewarding the last decade? Let’s take a closer look.
Popularity doesn’t always equal growth
In March 2014, Lloyds shares were trading at around 74p. Today, they’re closer to 50p – a 32% drop in valuation. To be fair, we have just come out of a fairly severe stock market correction. So, some of this decline could end up reversing itself as the stock market slowly recovers. Yet, even after factoring this in, there’s no denying that the banking stock has underperformed.
Of course, movements in the firm’s share price are only one part of the puzzle. One of the main attraction points of this business is its dividend. After all, regularly receiving interest payments on issued loans provides a fairly reliable stream of cash flow that can fund a dividend. So, how much have investors received over the years?
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
Total Dividend per Share
0.75p
2.25p
2.55p
3.05p
3.21p
1.12p
0.57p
2.00p
2.40p
2.76p
Ignoring the hiccup triggered by the 2020 pandemic, Lloyds has seemingly proven its ability to systematically raise shareholder payouts. And a total of 20.66p has been delivered to shareholders. Compared to the initial 2014 price of 74p, that represents a 28% gain, offsetting a large chunk of the loss incurred from the tumble in stock price. And if investors chose to reinvest any dividends received, they would have even made a small gain.
However, compared to other stocks in the FTSE 100, Lloyds shares haven’t exactly been a spectacular investment, especially when taking inflation into consideration. So, is Lloyds a bad stock to buy now? Not necessarily.
Why it might be worth buying today
The last decade has been pretty tough for most banks. After all, these businesses rely on interest rates to make money, and operating in a near-zero percent environment isn’t exactly conducive to that. Obviously, today’s landscape is vastly different. And we’ve already started seeing early signs of margin expansion at the bank.
Having said that, the Bank of England is also seeking to cut interest rates just as soon as inflation is back under control. And while I doubt they will return to near-zero levels, the bank is likely to once again face margin pressure in the short-to-medium term. So, what’s the right move?
Lloyds is no longer a high-growth enterprise. As a defensive business, its shares have primarily functioned as a method of protecting existing wealth rather than expanding it. Therefore, whether the stock belongs in a portfolio ultimately depends on the financial goal of an individual investor. Personally, I’m still firmly in the growth camp. As such, Lloyds shares aren’t all that tempting for my portfolio.
The post If I’d invested £10k in Lloyds shares 10 years ago, here’s how much I’d have now! appeared first on The Motley Fool UK.
Passive income stocks: our picks
Do you like the idea of dividend income?
The prospect of investing in a company just once, then sitting back and watching as it potentially pays a dividend out over and over?
If you’re excited by the thought of regular passive income payments, as well as the potential for significant growth on your initial investment…
Then we think you’ll want to see this report inside Motley Fool Share Advisor — ‘5 Essential Stocks For Passive Income Seekers’.
What’s more, today we’re giving away one of these stock picks, absolutely free!
Get your free passive income stock pick
setButtonColorDefaults(“#5FA85D”, ‘background’, ‘#5FA85D’);
setButtonColorDefaults(“#43A24A”, ‘border-color’, ‘#43A24A’);
setButtonColorDefaults(“#FFFFFF”, ‘color’, ‘#FFFFFF’);
})()
More reading
Lloyds shares are near 50p, but I think they’ve got a lot further to go
3 reasons why I’m not tempted by Lloyds’ rocketing share price!
The Lloyds share price nears 50p! Could it ever hit £1 again?
Now might be the last chance to buy Lloyds shares under 50p
I think the FTSE 100 is full to the brim with bargains!
Zaven Boyrazian has no position in any of the shares mentioned. The Motley Fool UK has recommended Lloyds Banking Group Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
