Lloyds‘ (LSE: LLOY) shares remain a popular investment. It seems that investors are drawn to the low share price, dividend income, and the fact that the stock remains miles off its highs.
The shares haven’t been a good long-term investment though. Had an investor put £5,000 into them a decade ago, they’d probably be pretty disappointed today…
The share price hasn’t gone up!
On 26 January 2015, Lloyds shares closed the day at 76p. So let’s say the investor picked up £5k worth of shares at that price. Ignoring trading commissions, they’d have got 6,578 shares.
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Now, on Friday (24 January), Lloyds’ share price ended the day at 61.8p. That’s 18.7% lower than the price 10 years ago. This means those 6,578 shares would now be worth £4,065.
That translates to a loss of roughly £935. Ouch!
Dividends change things
This doesn’t tell the full story though. Because Lloyds has paid dividends for a large part of the decade. I crunched the numbers and found that over the 10-year period, Lloyds paid out a total of 22.7p in dividends. Therefore, with 6,578 shares, the investor would have picked up income of around £1,493.
So including dividend income, the investor would have made a profit. Overall, their £5,000 would have grown to £5,558 – an 11% gain.
That’s better than a loss, obviously. But it isn’t a good return over a decade. Especially when you consider inflation over this period. At one stage during that period, inflation was running at over 10%.
The cost of holding on to Lloyds
It’s also really disappointing when you consider the returns from some other investments. Had the investor put £5,000 into London Stock Exchange Group shares (one of my favourite UK shares), that money would now be worth over £25,000. Had they put £5,000 into Apple shares (which are listed in the US), that money would now be worth over £47,000.
Even if they had simply lumped the money in a global tracker fund, they’d now have nearly £15,000. So the ‘opportunity cost’ of holding on to Lloyds shares for the long term has been huge.
I’ll be buying other shares
Now, investing’s a forward-looking pursuit, of course. And looking ahead, Lloyds shares could perform better over the next 10 years than they have over the last.
Today, the shares offer an attractive dividend yield of about 5.3%. That alone could generate solid returns (although dividends are never guaranteed and Lloyds has cut its dividend in the past).
The stock’s poor long-term track record spooks me however. So does the outlook for the bank, given the weak UK economy and the huge amount of disruption in banking today.
So I won’t be buying them any time soon. I think there are much better stocks to snap up for my portfolio today.
