Down 6% in 2 weeks, the Lloyds share price is in reverse

After hitting a one-year high on 8 April, the Lloyds share price has suddenly reversed course. But as a long-term investor, I see deep value in this stock.

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Lloyds Banking Group (LSE: LLOY) is one of the most widely held and frequently traded stocks on the London stock market. Hence, many UK investors (including me) keep a close eye on the Lloyds share price.

Looking lax

After a weak start to 2024, Lloyds then made some solid moves upwards. It ended 2023 at 47.71p, but dropped to close at 41.19p on 13 February. This left it 13.7% lower since the start of this year.

However, since Valentine’s Day, this popular stock has been on a roll. It rose steeply — and almost without retreating — to hit a 52-week high of 54.28p on 8 April. At this point, it had surged 31.8% from its 2024 low.

The Lloyds share price has since taken yet another step back. On Friday (19 April) the stock closed at 50.92p, 6.2% below its 2024 high. Meanwhile, the wider FTSE 100 index is down 0.6% over this period.

A long-term lemon?

Here’s how the shares have performed over eight timescales:

One week-0.1%
One month+2.8%
Three months+19.4%
6 months+21.6%
One year+3.4%
Two years+12.2%
Three years+16.4%
Five years-22.7%
*These figures exclude dividends

Despite its weakness since 8 April, Lloyds has produced positive returns over six periods ranging from one month to three years. To be honest, this caught me by surprise, as I’d assumed the shares had endured a much rockier ride.

Nevertheless, the stock is down almost a quarter in the last five years. During this period, the Footsie index has risen by 6.3%. Thus, the Black Horse bank’s shares have underperformed the wider market by 29 percentage points in half a decade. Oops.

What about dividends?

Then again, the above figures exclude cash dividends, which are a major contributor to the long-term returns from UK shares. Indeed, the FTSE 100 currently offers a cash yield approaching 4% a year.

Furthermore, I regard Lloyds as a value/income/dividend stock for its ability to produce market-beating cash returns over time. Right now, the stock trades on a trailing multiple of 6.8 times earnings, generating an earnings yield of 14.7%.

This means its above-average dividend yield of 5.4% a year is covered over 2.7 times by historic earnings. To me, this suggests the payout from a group valued at £32.5bn is pretty solid, if not quite ‘as safe as houses’.

What next?

I dislike predicting short-term movements in share prices, so I won’t guess where the share price heads next. What I will say is that my wife and I own this stock in our family portfolio, plus we have no intention of selling at anywhere near current levels.

That said, I’m expecting UK bank earnings (and especially UK-focused Lloyds) to be lower in 2024 than in 2023. I suspect these will be dragged down by lower demand for credit, plus rising loan losses and bad debts. Even so, we’re riding the Black Horse and the Lloyds share price for the long run!

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.

Cliff D’Arcy has an economic interest in Lloyds Banking Group shares. The Motley Fool UK has recommended Lloyds Banking Group. 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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