I keep a close eye on the Lloyds (LSE: LLOY) share price and couldn’t help but notice it’s been edging closer to the 50p mark.
The shares have been creeping up from 41p, to current levels of 49p in the past month.
This little resurgence has me thinking about when Lloyds shares could potentially reach that magical £1 mark.
For context, the shares haven’t reached 50p for one year. I’d have to go back to mid-2008, the global financial crisis, for the last time the shares were trading over £1.
Factors to consider
One big factor that could push up the share price is the major share buybacks that Lloyds is currently undertaking. This helps boost investor sentiment, generally speaking, which can also push up the share price.
This initiative has been supported by a healthy balance sheet, driven by higher interest rates boosting earnings recently. Higher rates mean more earnings for banks. However, there’s also the threat of higher defaults, which can hurt performance, investor sentiment, and share price.
Last year alone, the bank spent £2bn on buybacks, and last month it announced another £1.4bn. No wonder the share price is rallying.
This could continue, but if interest rates drop, the coffers may dwindle to a level where it’s no longer viable for Lloyds to continue doing this.
Speaking of interest rates, no one truly knows where they will go. Personally, I don’t think we’ll return to near zero rates, like we’ve experienced for many years till recently, for some time. This could mean continued boosted earnings and further buybacks could propel the Lloyds share price upwards.
Continued economic volatility, including higher mortgage rates, a cost-of-living crisis, and demand for housing outstripping supply could all impact Lloyds shares. If rates come down, the UK’s largest mortgage lender could find new business is boosted, which could also send the shares upwards.
I’m not convinced the Lloyds share price will hit £1 any time soon. There’s just too much background noise and external issues occurring all at once. However, this small rally in the past month is a bit of positivity.
Passive income gem
Away from the share price, I still think Lloyds is a great dividend stock. The shares are dirt-cheap, on a price-to-earnings ratio of just 6.5, and a price-to-book ratio of just under 0.7.
The best part about Lloyds shares is the 5.5% dividend yield, which is well covered by earnings.
Current volatility right now could be replaced by greener pastures ahead once turbulence dissipates. This is linked to Lloyds’s market presence, its position as the UK’s largest mortgage lender, and an imbalanced housing market in the UK. These factors could boost the share price, and its level of return. However, I’m conscious that dividends are never guaranteed.
One issue that could potentially hurt Lloyds returns and share price, is the recent investigation into motor finance malpractice. This could be the next PPI-esque scandal, if you ask me. Lloyds, and other providers, are bracing themselves for potential refunds and compensation they may need to pay.
I’d happily buy some Lloyds shares for passive income alone when I’m able to.
