The Motley Fool

Lloyds Bank share price hits 1-year lows! Should I buy this FTSE 100 share now?

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.

The Lloyds Bank (LSE: LLOY) share price is at 26.1p as I write this Friday afternoon. If it ends the day at this level, this will be the lowest level it has hit in one year. For anyone who’s been following LLOY’s share price movements in the recent past, this shouldn’t be too much of the shock. The bank has been hit by many challenges in the recent past. Still, when the share price is this low, it raises the question – should I buy this FTSE 100 share?

Lloyds Bank share price sensitivity to dividends

I’d be cautious, is my short answer. Here’s why. Let’s start with the overall environment. That the stock markets have been hammered this year is no secret. But the Lloyds Bank share price didn’t hit sub-30p levels till a week after the FTSE 100 reached its lowest point.

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...

This tumble coincided with its dividend suspension announcement. The LLOY share price has shown side-ways movements since, even while many other FTSE 100 shares are touching all-time highs. My point is, that if the core reason for investor interest in LLOY was dividends, then it’s unlikely to be a stock that offers capital appreciation anytime soon. The contrary is more likely, in my view. 

Share price plateau

And indeed, there’s reason to believe that LLOY has been a better income than growth stock in the recent years. One look at its share price chart shows the plateau it was on until the stock market crash struck, making matters even worse. Which, leads me to believe, that until dividends make a comeback, an investment in the Lloyds Bank share won’t take us very far. 

Further, there’s no way of knowing whether it will start paying dividends anytime soon. The economy is improving, and I’m quite optimistic about its prospects for the July-September quarter. But, whether the recovery is sustainable is another question. This is especially because the Brexit deadline is looming large, with no deal in sight. Even if the UK comes out in fine form over time, I reckon a no-deal Brexit will affect it at least in the short term. With LLOY’s fortunes tied closely to the economy, I’m not bullish on the share price for now. 

Scandals disappoint investors

The Lloyds Bank share price has also been hit by banking sector challenges like the PPI scandal, which shaved off an appreciable proportion of its profits last year. In the latest setback for the bank, it has been revealed that LLOY forced small businesses to open business accounts to avail of the government support scheme. I didn’t find any explanations for this on the Lloyds Bank website, so there’s no way of knowing if there’s another side to the story but so far, LLOY comes out looking quite bad as a result. 

The takeaway for LLOY

Things may well turn around for this UK share though, overtime. It’s a large British bank, with a strong legacy and has been financially robust. It has been hit by the recession and the stock market crash, ongoing Brexit uncertainty, the PPI claims and government support scheme scandals. Time will tell how well it weathers these situations, but for now there are more dependable stocks to buy.

“This Stock Could Be Like Buying Amazon in 1997”

I'm sure you'll agree that's quite the statement from Motley Fool Co-Founder Tom Gardner.

But since our US analyst team first recommended shares in this unique tech stock back in 2016, the value has soared.

What's more, we firmly believe there's still plenty of upside in its future. In fact, even throughout the current coronavirus crisis, its performance has been beating Wall St expectations.

And right now, we're giving you a chance to discover exactly what has got our analysts all fired up about this niche industry phenomenon, in our FREE special report, A Top US Share From The Motley Fool.

Click here to claim your copy now — and we’ll tell you the name of this Top US Share… free of charge!

Manika Premsingh has no position in any of the shares mentioned. 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.