Lloyds Bank (LSE: LLOY) is one of the most popular stocks in the UK. Along with other FTSE 100 stocks such as Royal Dutch Shell, BP, and BT Group, Lloyds can be found within a lot of private investor portfolios.
Have Lloyds shares actually been a good investment in recent years though? Let’s take a look at how much £1,000 invested in it two years ago would be worth today.
A frustrating stock
In my view, the best way to describe Lloyds’ share price performance over the last two years is frustrating.
Two years ago, the shares were changing hands for around 68p. This means £1,000 would have got you approximately 1,471 shares (I’ve ignored trading commissions and stamp duty for simplicity).
Looking at the two-year share price chart, you would have actually enjoyed some capital gains immediately after buying as the shares shot up to 72p in late January 2018. However, since then, the stock has underperformed due to Brexit uncertainty and the PPI claims debacle.
Today, Lloyds shares trade for around 63p, meaning that, had you bought two years ago, you’d now be down around 7.4% on your original purchase price. In other words, your original investment of £1,000 would now be worth about £926. Ouch.
Don’t forget dividends
Of course, Lloyds’ share price only tells part of the story. It’s important to factor in dividends as these would have boosted returns (the firm pays quite a generous dividend).
Looking at the dividend history, had you bought the stock two years ago, I calculate that you would have been entitled to 6.38p per share in dividends to date. On 1,471 shares, that equates to total dividends of roughly £94. Adding these to the value of your shares produces a total of £1,020.
So overall, if you’d invested £1K into Lloyds two years ago, your money would now be worth £1,020 meaning you’d just be in profit (it would just about be wiped out if we did count trading commissions and stamp duty).
Make no mistake, that’s a disappointing return over two years. You may have been better off keeping your money in cash savings.
So, what are the key takeaways from this analysis?
Well, for starters, it highlights the dangers of jumping on board popular stocks that everyone else owns. Just because a stock is popular doesn’t mean it will be a good investment.
Secondly, the analysis highlights the dangers associated with focusing exclusively on well-known large-cap stocks. While Lloyds shares have gone nowhere over the last two years (as have the likes of Shell, BP, and BT), many smaller companies have produced amazing returns for investors.
For example, over the last two years, shares in JD Sports Fashion have risen nearly 140%, turning £1K into nearly £2.5K. Similarly, shares in identity specialist GB Group have risen 83%, turning £1K into more than £1.8K.
Ultimately, if you’re looking for higher returns on your money, it can be a good idea to look outside the FTSE 100.
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Edward Sheldon owns shares in Lloyds Banking Group, JD Sports Fashion, and GB 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.