Here’s how much income I’d get if I invested my entire £20k ISA into Lloyds shares

Harvey Jones bought Lloyds shares last year and is kicking himself for failing to buy even more of them. The dividend income is to die for.

| 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.

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.

In June last year, I decided Lloyds (LSE: LLOY) shares were an unmissable buy at 45.06p so I bought 4,403 for £2k. The Lloyds share price dropped to 40.89p in September and this time my £2k picked up 4,856 shares.

Lloyds has since paid me two dividends of £40 and £172, which I automatically reinvested, lifting my total holding to 9,657 shares. My original £4k is now worth £5,200. That’s a total return of 30% in a year.

Top dividend stock

The Lloyds share price is up 19.35% over one year so I’m a happy bunny. Yet these are early days. I hope to hold this FTSE 100 stock for years and ideally decades, if all goes well.

Should you invest £1,000 in Legal & General right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Legal & General made the list?

See the 6 stocks

Created with Highcharts 11.4.3Lloyds Banking Group Plc PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.co.uk

My only regret is that I didn’t buy anywhere near enough Lloyds shares. No stock is without risk, but this looks safer than most. Since the traumas of the financial crisis, the big banks have built their capital strength and in the case of Lloyds, withdrawn from risky investment banking activities. Its common equity tier 1 (CET1) capital ratio was a solid 14.4% at the end of 2023. It has zero debt. It’s a far cry from the casino capitalism of yore.

I’ve been toying with the idea of throwing my entire Stocks and Shares ISA allowance into it. Is there anything to stop me?

FTSE 100 high-yielder

Today, Lloyds shares trade at 53.86p. That’s 31.7% more than I paid in September, which suggests that some of their recovery potential has been used up. They’re hardly overpriced though, trading at 9.36 times forward earnings. The price-to-book value has crept up from 0.6 to 0.7, but that’s still below the figure of 1 usually seen as fair value.

They offer plenty of dividend growth potential too. The trailing yield is 5.12%. The forward yield for 2024 is 5.43%. In 2025, analysts reckon the bank will yield 5.93%, nicely covered twice by earnings.

In 2023, the dividend per share climbed from 2.4p to 2.76p, a rise of 15%. Markets anticipate a smaller increase this year to around 2.93p per share. 

Investing £20k today would buy me 37,133 shares. They’d generate income of £1,088 in 2024. I can find higher-yielding stocks on the FTSE 100, but that’s still a solid rate of income.

Lloyds had a bumper 2023, posting pre-tax profits of £7.5bn and funding a £2bn share buyback. It may struggle to top that in 2024. When the Bank of England finally cuts base rates, that will squeeze net interest margins. We got an early taster in Q1, when margins fell 12% to £3.127bn, with mortgages taking the brunt amid tight competition.

I’m keen to increase my stake in Lloyds, but won’t go the full £20k. I’ll feed in another £5k this year though, taking advantage of any dips. This FTSE 100 dividend growth star has shown its potential over the last year. I can’t wait to see what it can do over 10 or 20 years.

Should you invest £1,000 in Legal & General right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.

And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Legal & General made the list?

See the 6 stocks

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.

Harvey Jones 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.

More on Investing Articles

artificial intelligence investing algorithms
Investing Articles

Up 272% in just a year, is Palantir stock just getting started?

This writer recognises that Palantir has grown its business very well -- but does the stock price offer him an…

Read more »

Runner standing at the starting point with 2025 year for starting in new year 2025 to achieve business planing and success concept.
Investing Articles

Up 50%? The Aston Martin share price forecast is mind-blowing! 

If analysts are right, the Aston Aston Martin share price could absolutely rocket in the year ahead. Harvey Jones says…

Read more »

Investing Articles

As the S&P 500 drops, here are 2 Stocks and Shares ISA holdings I’m watching

Our writer has different views on how President Trump's tariffs might affect these two US holdings in his Stocks and…

Read more »

Surprised Black girl holding teddy bear toy on Christmas
Investing Articles

£10,000 invested in Tesla stock at Christmas is now worth…

Tesla stock has been one of best-performing investments of the past decade. But things haven't gone to plan for investors…

Read more »

Investing Articles

Up 279% in 5 years, could Meta stock keep soaring?

Meta stock has more than tripled in five years. This writer sees lots to like about the business but also…

Read more »

Pink 3D image of the numbers '2025' growing in size
Investing Articles

25% total return in a year? Is now the perfect time to buy BP shares?

BP shares are on the front line of today's global economic and political uncertainty but analysts think they can still…

Read more »

Affectionate Asian senior mother and daughter using smartphone together at home, smiling joyfully
Investing Articles

With Cash ISA changes coming, could now be the time to consider buying shares?

Changes to the Cash ISA could lead to greater investment in the stock market. This could be a good thing…

Read more »

Investing Articles

These FTSE 100 dividend shares just got cheaper, thanks to President Trump!

Investors buying dividend shares can lock in bigger long-term yields when share prices take a tumble. These two just did…

Read more »