Is this as good as it gets for the Lloyds share price?

Harvey Jones is thrilled by the rising Lloyds share price, which has really delivered on its potential over the last year. Next year may be tougher.

| 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.

I can’t believe the Lloyds (LSE: LLOY) share price. After declining for a decade, it’s finally pointing the right way. We’ve waited long enough.

Lloyds shares are up 36.95% over the past year, more than three times the 12.1% return on the FTSE 100 over the same period. They boast a trailing yield of 4.78%, lifting the total return to more than 40%.

Created with Highcharts 11.4.3Lloyds Banking Group Plc PriceZoom1M3M6MYTD1Y5Y10YALL6 Apr 20204 Apr 2025Zoom ▾Jul '20Jan '21Jul '21Jan '22Jul '22Jan '23Jul '23Jan '24Jul '24Jan '25202120212022202220232023202420242025202520406080www.fool.co.uk

Who saw that coming? I did, actually. I bought the shares in June and September last year, at an average price of 43.62p. Today, they trade at 57.84p, plus I’ve reinvested two dividends. I don’t often get my timing this right.

Should you invest £1,000 in Tesla 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 Tesla made the list?

See the 6 stocks

FTSE 100 income star

I felt the stock was due a revival but I didn’t expected it to happen while interest rates were still high, house prices stagnating, and consumer spending squeezed.

Yet it has. One reason is that investors are forward-looking. They think things will get better six to nine months down the line at which point rising wealth will drive up demand for savings and mortgage products.

Better still, this will cut debt impairments. In fact, that’s already happening. Lloyds now allocates just £57m to cover bad loans, against £243m last year.

Investors seem to be factoring in rather a lot of good news but the recovery will also bring challenges. When the Bank of England finally cuts base rates, this will erode Lloyds’ net interest margins, the difference between what it pays savers and charges borrowers. Margin compression has already begun and it hurts.

On 24 April, Lloyds reported that Q1 net interest margins had dropped from 3.22% to 2.95%, while operating expenses climbed. Profits fell 28% to £1.63bn. That doesn’t seem to bother investors. Lloyds’ shares have climbed 12% since then.

Investors have also chosen to ignore a potential motor finance mis-selling scandal, for which Lloyds has set aside a modest £450m. Any compensation bill could be much higher than that. Nobody knows.

This stock isn’t as cheap

Another problem is that the rising share price has driven down the yield. Last October, it spiked at 6.3%. Today it’s back down to 4.78%. That’s not bad, just not as good as it was. Let’s see what the chart says.


Chart by TradingView

Happily, markets forecast reckon the shares will yield 5.47% in 2025. Even better, they reckon net income will jump from £3.76bn in 2024 to £4.27bn in 2025.

Another concern is that Lloyds shares aren’t as cheap as they were. Today, they trade at 10.4 times 2024 earnings. I bought at close to six times. The price-to-book ratio has steadily climbed, too. Three years ago, it languished around 0.4. Today it’s close to fair value. Let’s see what the chart says.


Chart by TradingView

I have no intention of selling my Lloyd shares. I’ve got a pretty good allocation, and plan to hold onto them for years. Decades, if I’m lucky. Yet I won’t buy more today. I think other FTSE 100 high yielders now offer better comeback potential.

Should you invest £1,000 in Tesla 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 Tesla 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

Investing Articles

Prediction: 12 months from now, £5,000 invested in Tesla stock could be worth…

Tesla stock has endured a miserable year so far, falling by 29%. Muhammad Cheema takes a look at how it…

Read more »

Investing Articles

See what £10,000 invested in Tesla shares at their mid-December peak is worth today 

As the world absorbs the full scale of Donald Trump's tariffs, Tesla shares are reeling. Investors who bought the stock…

Read more »

Hand flipping wooden cubes for change wording" Panic " to " Calm".
Dividend Shares

2 ‘safe’ LSE dividend stocks to consider as global markets sell off

As global markets experience high levels of volatility due to economic uncertainty, investors are piling into these ‘safe-haven’ dividend stocks.

Read more »

Investing Articles

US stock market rout: an unmissable opportunity for investors?

His tech-heavy portfolio has been smashed by Trump’s tariffs. However, Dr James Fox believes there could be some opportunities in…

Read more »

Investing Articles

After a 13% ‘Trump tariff’ fall, is the Barclays share price too cheap to miss?

Does the Barclays share price fall mean we should all panic and run screaming from the stock market? Nah, of…

Read more »

Mature Caucasian woman sat at a table with coffee and laptop while making notes on paper
Investing Articles

2 investment trusts to consider for a Stocks and Shares ISA

These two investment trusts have a different focus -- but our writer sees both as worth considering, one more for…

Read more »

Investing Articles

Deutsche Bank reiterates Buy rating on 9.6% yielding FTSE 250 stock that was “most shorted in UK”

Our writer investigates why a major broker remains optimistic about a FTSE 250 stock that was once the most shorted…

Read more »

Investing Articles

2 things to remember when stock markets are turbulent

US trade policy has rattled the stock markets in New York, London and elsewhere. Our writer outlines a couple of…

Read more »