Of all the stocks included in the FTSE 100 index, I probably keep the closest eye on the Lloyds Banking Group (LSE: LLOY) share price. I’m not the only one, as Lloyds shares are among the most widely held and heavily traded in London.
The share price is touching 50p
I don’t personally own Lloyds stock, but my wife bought some for our family portfolio in mid-2022. We bought these shares at a price — including buying commission and stamp duty — of 43.45p a share.
At Monday’s close, Lloyds stood at 49.48p, so we’re sitting on a paper gain of roughly 6p a share so far. That equates to a return of around 13.9% in six months or so. I see that as a perfectly reasonable gain from a ‘boring’ value/dividend/income share.
Then again, the Black Horse bank’s stock has been higher over 12 months, hitting a 52-week peak of 56p exactly a year ago, on 17 January 2022. Then came Russia’s invasion of Ukraine, which crashed global stock markets. Thus, over one year, Lloyds shares have lost around 11.6% of their value, versus a 3.8% gain for the FTSE 100.
What’s more, they’ve declined by 30.8% in the past five years. All these figures exclude cash dividends, which would boost them by a few percentage points a year. Even so, Lloyds has been a long-term lemon for its long-suffering shareholders.
Are Lloyds shares really cheap?
At the current share price of almost 49.5p, the entire Lloyds group is valued at £33.3bn. I don’t see this as a high price to buy the UK’s leading mortgage lender, having 26m customers across a range of well known brands. If I could borrow this sum, I’d gladly buy Lloyds outright today.
And as a fundamental investor, Lloyds shares don’t look expensive to me today, but nor do they look incredibly cheap. The stock trades on a price-to-earnings ratio of 8.2, for an annual earnings yield of 12.2%. The trailing dividend yield of 4.3% a year is covered a healthy 2.8 times by earnings.
To me, this suggests that Lloyds’ dividend yield is rock-solid for 2023, despite dark clouds gathering on the economic horizon. For example, disposable incomes are plunging — hit by soaring inflation, sky-high energy bills and rising interest rates. However, I think household balance sheets are strong enough to keep Lloyds’ loan losses and bad debts within reasonable levels in 2023-24.
Would I buy at below 50p?
Now the big question: would I buy these shares at sub-50p? The answer is yes, but not right now. That’s because we’re in the process of building a new share portfolio. So far, this includes 16 different shares, to which I’d like to add at least another four before considering duplicate purchases.
In summary, while I see Lloyds stock as reasonably priced right now, we already own a chunk, so no rush to buy more just yet!
The post As the Lloyds share price flirts with 50p, do I buy more? appeared first on The Motley Fool UK.
Cliff D'Arcy has an economic interest in Lloyds Banking Group shares. 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.
Motley Fool UK 2023