The Lloyds (LSE: LLOY) share price has floated between the 40p to 45p range for what feels like an age. But after recently breaking the 45p barrier, I’m hoping this will provide it with some much-needed momentum to kick on.
I’m a shareholder, so I’m happy to have seen a 10% rise in the share price in the last month. As I write, it’s up 1% in 2023. The last 12 months have seen it rise nearly 6%.
However, it’s not all been plain sailing. In the last five years, Lloyds shareholders have endured a lot. From its pre-pandemic price of 64p, the stock has come tumbling down. It’s staged a recovery from its 2020 lows, but it’s nowhere near the levels seen years ago.
Nevertheless, that’s in the past. I’m more worried about where it’ll head in the next five years. Could it continue rising?
Breaking it down
The main reason for a lift in its share price has been positive investor sentiment. It’s now hoped that interest rates have peaked, and the Bank of England (BoE) will start cutting next year. With the base rate at 5.25%, markets predict it could fall a percentage point within the next 12 months.
That’s good news for Lloyds. Mortgage rates are falling as a result and this will no doubt provide the housing market with some stability. As the UK’s largest mortgage lender, this should offer the business a boost going forward.
As its price has risen, its dividend yield has fallen. But still, at 5.3%, I’m not complaining. Covered three times by earnings, I also think there’s room for growth. This is reflected in analyst’s forecasts, with some expecting the yield to hit up to 7% in the years ahead. Of course, it must be noted that dividends are not guaranteed.
My biggest issue with Lloyds is its close ties to the UK economy. Unlike many of its competitors, it has very little presence overseas. This makes it more prone to any blips in the domestic economy. It’s been predicted that we won’t see growth until 2025 at the earliest. And while sentiment has rallied with optimism surrounding interest rates falling, BoE Governor Andrew Bailey recently commented that there was “still some way to go” to bring down inflation.
That said, I love a bargain. And Lloyds shares look cheap. A price-to-earnings ratio of six places it comfortably below the FTSE 100 average. A price-to-book ratio of 0.6, with one being seen as fair value, also signals to me that the stock could present a buying opportunity.
My move
In all honesty, I’m not expecting much movement from the Lloyds share price in 2024. In fact, I’d imagine we’ll continue to see volatility.
But as a long-term investor, I’m not too bothered. I see Lloyds as a profitable bank with a low valuation. That’s a combination that draws me in. As long as cash permits, I’ll slowly be adding to my Lloyds position in 2024. The extra income I’ll earn from its meaty yield will tide me over for the time being.
