At 44p, should investors consider Lloyds shares today?

Lloyds shares have struggled in the past. But now at 44p, does this mean a chance for investors to buy profitably? This Fool explores.

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Lloyds (LSE: LLOY) shares have failed to deliver in 2023, down around 6% year to date.

The stock has taken a beating in the last 18 months or so as inflation and rising interest rates have dented investor confidence.

Moreover, the financial sector has experienced major volatility in recent times, exemplified by the collapse of Silicon Valley Bank, the UK arm of which was eventually snapped up by Lloyds’ competitor HSBC for just £1.

Yet with this comes the question of whether Lloyds shares are too cheap to ignore. And at 44p, there’s certainly a case to be made.

Hiking rates

Rising interest rates are something of a double-edged sword for Lloyds.

First of all, it’s clear to see that Lloyds has benefited from the actions taken by the Bank of England. With higher rates, The Black Horse Bank can charge customers more when they borrow. This has translated to a major boost to the group’s its net interest income, which rose 20% in Q1 led by growth in the net interest margin.

Also, with saving rates at levels not seen in years, it’s arguably easier for the business to attract new customers. Furthermore, encouraging existing ones to deposit more should also be easier.

However, there’s a caveat. Higher rates place pressure on Lloyds given the heightened likelihood of customers defaulting on their loans, leading to higher impairment costs. For Q1, while its impairment cost come in lower than forecasted, it still stood at £200m.

A meaty dividend

That aside, I think there are other factors that make Lloyds an attractive proposition for investors.

The stock offers a dividend yield of 5.4%, which provides a great way for investors seeking income to put their money to work against inflation. The business is also placing greater emphasis on returning value to shareholders, with it recently announcing plans for a £2bn share buy-back scheme.

While dividend payments can be cut at any time by a business, with its dividends covered over three times by earnings, this should provide investors with some level of comfort.

On top of this, Lloyds stock also looks cheap, with a price-to-earnings ratio of just 6.

The firm recently announced its new and ambitious £3bn strategy spearheaded by group CEO Charlie Nunn, which aims to diversify its revenue streams. While still upgrading its core products, Lloyds also plans to focus more on areas such as its digital offerings and its rental venture, Citra Living.

Too good to pass up?

So, at their current price, are Lloyds shares a no-brainer?

Well, I already own the stock. And at 44p, I think they present a great buying opportunity.

 Short-term concerns could put pressure on its share price. But as a Fool, I’m not worried about that.

With a low valuation and a progressive long-term strategy, I like Lloyds. The potential for some additional income on the side is also a bonus.

If I had any cash to spare, I’d most certainly be looking to snap up some more shares.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

HSBC Holdings is an advertising partner of The Ascent, a Motley Fool company. Charlie Keough has positions in Lloyds Banking Group Plc. The Motley Fool UK has recommended HSBC Holdings and 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.

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