Can these things help the Lloyds share price double in 2024?

Will I be forever wrong about the Lloyds share price? I don’t care really, not if I can keep buying more at such a low valuation.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

A pastel colored growing graph with rising rocket.

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

We’re near the end of another year, and the Lloyds Banking Group (LSE: LLOY) share price has disappointed investors again.

I start each year thinking surely Lloyds will bounce back this time. But it never does. All it’s managed in the past 12 months is a weedy 3% gain.

That leaves Lloyds down 10.5% over five years, even though we’ve had good dividends. The cash did stop for Covid, but it came back as soon as the regulator allowed.

Dividends

The dividend is one of the things I think might boost the Lloyds share price in the next 12 months. But, as it hasn’t done the job so far, what might be different this time?

We’re looking at a forecast 2023 dividend yield of 5.3%. And it would be more than twice covered by earnings.

What’s more, broker forecasts show the yield growing in the following two years too.

But when it comes to forecasts, it’s all about confidence. And so far, I just don’t think the big investors have had much of that.

Still, I think we might be close to a change in sentiment.

Forecast growth

There’s a consensus that 2024 could see FTSE 100 ordinary dividends come very close to the record year of 2018. So even better than before the pandemic then.

And the City expects financial stocks to lead the way in earnings growth.

I think that might change the mood for the better. But one thing recently in the news has poured cold water on it all. I’m talking of interest rates, and the Bank of England’s gloomy mood. Still, they must come down in 2024, mustn’t they? It would surely help.

Price double

Right now, we’re looking at a price-to-earnings (P/E) ratio of 6.5 based on 2023 forecasts, which is very low.

A doubling, even if earnings don’t rise, could see that reach 13 in 2024. That’s still below the FTSE 100’s long-term average. And banks have typically commanded higher valuations over the long term.

It would drop the 2024 dividend to about 3.2% though.

But if it keeps rising, with strong cover by earnings, that could still be a fair valuation.

Other dividends

But then the Lloyds dividend is a bit overshadowed by others right now.

When we have M&G on 9%, and British American Tobacco on 10%, why take a risk on Lloyds?

Those stocks have their own risks. But I do think it’s a valid factor.

So maybe we’ll need to see those big yields coming down, ideally through share price rises, to make Lloyds look more attractive.

Hang on a minute…

Hmm, now, I just thought… Did I really say Lloyds shares disappointed investors in 2023?

I got that all wrong, at least if I’m talking about myself. I want to buy more in the years ahead, so I’m happy if they stay cheap.

That way I can lock in better dividends for less money.

So maybe the Lloyds share price might double in 2024. Or at least in the next few years. But I hope not.

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.

Alan Oscroft has positions in Lloyds Banking Group Plc. The Motley Fool UK has recommended British American Tobacco P.l.c., Lloyds Banking Group Plc, and M&g 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.

More on Investing Articles

US Stock

Here are the best-performing S&P 500 stocks after the US election result

Jon Smith notes some of the largest gainers from the S&P 500 yesterday and explains how the election result has…

Read more »

Growth Shares

2 UK stocks knocking on the door of promotion to the FTSE 100

Jon Smith points out a couple of UK stocks that he feels could be ready for the big league based…

Read more »

Investing Articles

Rolls-Royce shares just fell 7%. Is it time to buy?

This investor in Rolls-Royce shares takes a look at the FTSE 100 engine maker's trading update to see what caused…

Read more »

Young Black woman looking concerned while in front of her laptop
Investing Articles

What’s going on with the Auto Trader share price?

Paul Summers takes a closer look at why the Auto Trader share price has tumbled despite the company posting higher…

Read more »

Investing Articles

Legal & General shares look set to give me a mind-blowing 10.22% yield in 2026!

Harvey Jones is getting a brilliant second income from his Legal & General shares and expects even more to come.…

Read more »

Investing Articles

I’d consider this beaten-down FTSE 100 dividend stock to target a second income of £19,000

Our writer sees an opportunity to earn a substantial second income by investing in this UK insurance giant. Here’s his…

Read more »

Investing Articles

How cheap is the 72p Vodafone share price?

The Vodafone share price looks very cheap having fallen to a 72p price tag. But is it really the bargain…

Read more »

Aerial shot showing an aircraft shadow flying over an idyllic beach
Investing Articles

Up 43% in a year and the IAG share price could keep on rising!

One of the FTSE 100’s highest-flying stocks still looks cheap on an earnings basis. Is this a brilliant buy for…

Read more »