The Lloyds share price continues to fall. Is it now too cheap to ignore?

At 41p the Lloyds share price looks cheap. Here, this Fool explores whether at this price, the stock it too good to pass on.

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In what seems to be a recurring theme, the Lloyds (LSE: LLOY) share price has failed to deliver this year.

I hold the stock myself. And I wouldn’t hold it against investors who questioned why I do. After all, its performance in recent times has been dire.

But now at 41p, is it cheap enough to be turning their heads?

Historical performance

The last five years have been far from joyful for the bank’s shareholders. Five years ago, a single share would have cost me around 59p. Today, I can pick one up for 30% cheaper.

It’s continued with its poor form more recently too. In the last six months alone it’s plummeted by 20%.

All doom and gloom?

So, is there light at the end of the tunnel?

Well, one of the main reasons I own the shares is for passive income. As I write, the stock presents investors with a whopping dividend yield of 6.1%. This isn’t inflation-beating, but it’s not far off. What’s more, the firm recently announced plans for a £2bn share buyback scheme, which is an encouraging sign.

Of course, there’s always the risk that dividends can be cut. But with it covered around three times by earnings, I’m confident Lloyds will pay out.

In addition to this, the business also flexed its strong performance in its half-year results. While impairment charges rose, a side effect of inflation, pre-tax profits and net income experienced significant jumps. With a 14% rise in underlying net interest income, Lloyds also upgraded its guidance for the remainder of 2023.

While its latest results are promising, I’m more focused on where the bank is heading in the years ahead. And as a Fool, the focus being placed on the long term is something I’m a big fan of. This predominantly exists via plans recently announced by CEO Charlie Nunn, who stated the firm is aiming to diversify revenue streams over the next three years. This £3bn investment should hopefully provide some uplift for the Lloyds share price.

What I’m doing

I remain bullish on Lloyds shares. The stock I already own I’ll continue to hold but I won’t buy more at the current price. Yet if the price continues to fall and my budget permits, I’ll be seeking to snap up some more shares.

The main draw for me is passive income. A lower share price means a higher yield, which translates to a more attractive proposition for my portfolio.

I like the moves the bank is making. And fundamentally the stock looks cheap, with a price-to-earnings ratio of just six.

Market watchers continue to have inflation at the front of their minds. And while this could hurt the share price in the coming months, I can’t see it being an issue in multiple years’ time. It’s been a rough period for the share price, but here’s hoping it stages a comeback.

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.

Charlie Keough has positions in Lloyds Banking Group Plc. 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.

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