The Lloyds (LSE: LLOY) share price had a rip-roaring 2025. It climbed 80% over the year, and is now up 175% over five years. Like the other FTSE 100 banks, it’s finally escaped the shadow of the financial crisis, and loyal investors are reaping the rewards. So what does the next 12 months hold?
Lloyds has also resumed its mantle as a brilliant dividend income stock. Yet here the trajectory has been bumpier. During the pandemic it slashed shareholder payouts twice, by 65% in 2019 and 50% in 2020. A 250% hike in 2021 cheered investors, and they’ve continued to climb nicely, as my table shows.
| Lloyds | 2020 | 2021 | 2022 | 2023 | 2024 |
| Total dividend | 0.57p | 2.00p | 2.40p | 2.76p | 3.17p |
| Growth | -49.1% | 250.1% | 20.0% | 15.0% | 14.9% |
The trailing yield has fallen to a modest 3.2%, only slightly above the FTSE 100 average, but that’s down to the skyrocketing share price rather than any slackness in rewarding shareholders.
FTSE 100 firepower
I’m expecting the dividend per share to rise by around 15% this year, and the forecast yield for 2026 is a more impressive 4.2%. Barring shocks, Lloyds looks good or it.
As ever when shares go on a strong run like this, the big question is whether it can continue. Lloyds isn’t as cheap as it was
When I added the bank to my Self-Invested Personal Pension (SIPP) in 2023, it looked stupidly cheap. The price-to-earnings ratio hovered around six, well below fair value figure of 16, while with the price-to-book ratio was just 0.4.
It’s a different story today, with a P/E of around 17.5, all this though this falls to 11.6 based on forecast earnings. The P/B is notably higher at around 1.2.
If the Lloyds share price recovery caught investors off guard, that won’t be the case in 2026. The catch-up process is now over. New investors must temper expectations.
Dividend income and buybacks
Interest rates are falling, which will hit net interest margins and squeeze bank profits. Lower rates may re-energise the sluggish UK economy, and boost mortgage lending, but still pose a challenge.
Anybody considering Lloyds today must take a long-term view. It’s unlikely to shoot the lights out again this year, but with luck, it will steadily build on its dominance in mortgage and retail banking, to generate stable, steadily rising profits over time. As always, there’s the potential for shocks. The shares wouldn’t escape the impact of a wider stock market crash, for example. But if we get one, and Lloyds falls, it would be high on my shopping list.
I wouldn’t dream of selling my Lloyds shares today. With luck, I’ll hold them for life. I’m reinvesting every dividend I get, and celebrating every share buyback, while building my stake for retirement. At some point, I’ll take my dividends as income.
So while Lloyds isn’t the bargain it was, I still think it’s worth considering as part of a balanced Stocks and Shares ISA or SIPP portfolio. But I’ll also be trawling the FTSE 100 for the next big recovery stock, I can see plenty of potential out there.
