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The Lloyds share price is up 96% since October. Would I buy today?

Image: Lloyds Banking Group

So far, 2021 has been a good year for Lloyds Banking Group (LSE: LLOY) shareholders. Lloyds shares ended 2020 at 36.44p. As I write, this FTSE 100 stock trades around 46.97p. That’s a gain of 10.53p, for a year-to-date rise of almost three-tenths (28.9%). However, the Lloyds share price has been very volatile over the past 12 months, so where might it go next?

The Lloyds share price zig-zags

The Lloyds share price has seen pretty steep and sharp moves over 2020/21. Nine months ago, on 22 September 2020, the shares slumped to a 52-week intra-day low of 23.58p. This followed news that the UK would enter another lockdown, this time over winter. Obviously, these restrictions were bad news for the UK’s largest consumer lender and its customers. But then came ‘Vaccine Monday’ (9 November 2020), with good news of several effective vaccines against Covid-19.

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After this welcome shot in the arm, the Lloyds share price took off like a rocket. By the end of 2020, it was 12.86p higher — more than half (+54.5%) above its 2020 low. However, by 29 January 2021, it slipped to close at 33p.

To me, this looked like a bargain price to buy into a Big Five bank. This proved to be so, as the shares soared to hit an intra-day high of 50.56p on 1 June. That’s a gain of 17.56p and an uplift of more than a third (+34.7%) in four months. However, as worries about inflation recently unnerved markets, LLOY has fallen back to below 47p today.

What next for LLOY?

Today, the Lloyds share price stands 7.6% below its 52-week high set three weeks ago. At this level, I still see value in this £33bn bank. After all, the group should benefit from the UK economy fully opening up a month from now. Also, in spite of Covid-19, the UK economy is growing, which is good news for cyclical companies. Furthermore, Lloyds’ balance sheet is strengthening, plus its shares trade at a deep discount to their underlying net asset value (NAV).

In addition, after suspending its dividend in 2020, Lloyds has reinstated it, albeit at a much lower level. So far, the only cash dividend paid to shareholders was 0.57p a share on 25 May. Of course, the growth of this dividend will be a key driver of the future Lloyds share price (the faster, the better). But I suspect it won’t be plain sailing from here for LLOY and its long-suffering shareholders. That’s because share prices don’t rise in straight lines, just as trees don’t grow straight to the sky.

The world walks a tightrope

For me, a multi-year economic boom would be great news for the Lloyds share price. But this widely anticipated event may not materialise quite as planned. Already, we’ve seen multiple variants of Covid-19, with some deadlier and more transmissible than the original virus. If new coronavirus infections outweigh global vaccination efforts, then the world could be plunged into a third wave and further lockdowns. Obviously, this would be grim news for us all.

I don’t own this FTSE 100 share at present. However, on balance, I’d be a buyer with the Lloyds share price below 47p. Indeed, with a following wind, I expect it to hit 60p in 2021/22, as do several of my colleagues. Hence, I’d willingly buy LLOY today for rising dividend income and future capital gains.

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Cliffdarcy does not own shares in Lloyds 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.

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