The Motley Fool

Can FTSE 100 dividend stock Lloyds Banking Group boost your wealth?

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.

Scene depicting the City of London, home of the FTSE 100
Image source: Getty Images.

Overall, I believe there is a lot of potential for the black horse of Lloyds Banking Group (LSE: LLOY) to ride forwards.

The dividend yield at the time of writing is a tasty 5.52%, comfortably above the FTSE 100 average, and is covered 1.71 times by earnings. There has been a consistent rise in the dividend since 2014, with the last three years seeing rises of 13.33%, 19.61% and 5.25%.

5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!

According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…

And if you click here we’ll show you something that could be key to unlocking 5G’s full potential...

The bank’s price to net asset value currently stands at a bargain 0.8 while its common equity tier one ratio is an impressive 13.9%.

There is one key event, though, which I predict could see substantially more cash being distributed to share holders in dividends, which will soon be paid quarterly.

That is the end of PPI payouts, which is fast approaching on 29 August 2019. This can’t come soon enough for Lloyds, with the bank being forced to shell out £19.4 billion to date over the 16 million policies it sold since 2000.

In addition to this, there are signs of strength for the UK economy, which is of paramount importance to Lloyds. Unemployment is at a 43-year low and wage growth is reasonable. The end of the public sector cap gives scope for extra income to millions of households.

Customer service

It’s important to note that Lloyds still tops the tree for being the biggest provider of both mortgages and current accounts in the UK.

Lloyds’ customers are increasingly using the bank in a more digital fashion. As of 2018 there were 15.7 million active digital customers, a number that has been growing year on year. Over time, I believe this could lead to more branch closures, further reducing Lloyds’ costs.

Customer satisfaction, according to net promoter score – which is a measure of customer service at key touch points and the likelihood of users recommending Lloyds – was 61.8 in 2018, up from 61.2 in 2017. Complaints to the FCA per 1,000 accounts also dropped to 3.9 in the first half of 2018.

The ‘B’ word

The key issue for Lloyds, as with all UK-focused shares, is Brexit. I believe that eventually there will be some form of deal by 31 October 2019. There is a high probability Boris Johnson will be the next Conservative party leader, and the Brexit champion could be a better negotiator than Theresa May. The EU frequently leave deal-making decisions to the last minute, and they cannot afford to be without the UK payment of £39 billion.

So overall at a price of 58.16p at the time of writing I rate Lloyds a buy and will continue to hold the shares myself, as I believe there is a prospect of a decent capital gain, along with a solid dividend.

5 Stocks For Trying To Build Wealth After 50

Markets around the world are reeling from the coronavirus pandemic…

And with so many great companies trading at what look to be ‘discount-bin’ prices, now could be the time for savvy investors to snap up some potential bargains.

But whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be daunting prospect during such unprecedented times.

Fortunately, The Motley Fool is here to help: our UK Chief Investment Officer and his analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global lock-down…

You see, here at The Motley Fool we don’t believe “over-trading” is the right path to financial freedom in retirement; instead, we advocate buying and holding (for AT LEAST three to five years) 15 or more quality companies, with shareholder-focused management teams at the helm.

That’s why we’re sharing the names of all five of these companies in a special investing report that you can download today for FREE. If you’re 50 or over, we believe these stocks could be a great fit for any well-diversified portfolio, and that you can consider building a position in all five right away.

Click here to claim your free copy of this special investing report now!

Mark Howitt owns shares in Lloyd Banking Group. 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.

Our 6 'Best Buys Now' Shares

Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply click below to discover how you can take advantage of this.