Lloyds Banking Group (LSE: LLOY) shares are among the most widely held and traded here in the UK. For example, among one major broker’s clients, they were the #5 most-bought and #7 most-sold shares last week. But it’s been a rocky road for Lloyds shares over the past 12 months, because they have oscillated wildly.
Lloyds shares’ long decline
For the record, here’s how the Lloyds share price has performed over seven different time periods:
| One day | -1.1% |
| Five days | -0.7% |
| One month | -3.0% |
| Year to date | -7.8% |
| Six months | -11.1% |
| One year | -9.7% |
| Five years | -38.6% |
As you can see, over all seven timescales, Lloyds shares have lost value. They’re down nearly 8% in 2022, almost 10% over one year, and have slumped by close to 40% over half a decade. So this share is a dog with fleas that I should steer well clear of, correct? Not necessarily, because when I buy into a company, I’m buying its future and not its past.
Six negatives for the Black Horse bank
There’s a lot to be worried about in the world when considering whether to buy Lloyds shares. Red-hot inflation has forced central banks to raise interest rates. Also, rising prices are crimping consumer spending, raising fears of a recession. Russia has been waging war against Ukraine for the past three months. The Chinese economy is slowing down, hampered by falling factory output and a weakened property market. And the Covid-19 pandemic isn’t quite over yet.
None of this is good news for the UK’s leading retail banks, including Lloyds. What’s more, after growing strongly in 2019-21, UK house-price growth is predicted to decline in 2022-23. With house prices at record highs and mortgage rates rising, the air may slowly hiss out of our housing bubble. And Lloyds (and its shares) is heavily exposed to any weakness, because it owns the UK’s largest mortgage book.
I see this share as too cheap today
Despite all these negatives, I still view Lloyds shares as too cheap right now. That’s because as a bargain-hunting investor, I’m drawn to stocks with ‘value’ attributes. And the Black Horse bank fits that bill for me. Here are the group’s latest fundamentals:
| Share price | 44.02p |
| 52-week high (on 17 January 2022) | 56.00p |
| 52-week low (on 7 March 2022) | 38.10p |
| Market value | £30.5bn |
| Price/earnings ratio | 5.9 |
| Earnings yield | 16.9% |
| Dividend yield | 4.5% |
Lloyds shares currently trade at 44.02p, almost 12p (-21.4%) below their January high. But they have also bounced back 15.5% from their 7 March low.
What’s more, trading on a price-to-earnings ratio of 5.9 and an earnings yield of almost 17%, the shares appear to be among the cheapest FTSE 100 stocks. I may be missing something, but it seems to me that Mr Market has marked down this stock into bargain-bin territory. Furthermore, I’m attracted to the bank’s dividend yield of 4.5% a year, which beats the Footsie’s 4% cash yield.
In summary, there’s a whole lot to worry about around the world right now. But I see all this pessimism as built into Lloyds shares today. Hence, though I don’t own this stock, I would buy Lloyds shares today for their cash dividends and hoped-for future capital gains!
