Should I buy Lloyds shares in August?

After the release of its half-year results last week, Charlie Keough looks at whether now is a good time to buy Lloyds shares.

Charlie Keough ❯

Charlie Keough is a freelance investment writer. Prior to joining the Motley Fool UK, he worked for a global asset management company. He has also spent time working at a corporate finance boutique focused on sell-side M&A. He aims to buy blue-chip high yield stocks that he can hold in his portfolio for the decades to come.

Published 6 August, 2021 4:50 pm BST

| More on: LLOY

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.

After taking a hit at the outbreak of the pandemic, the Lloyds Banking Group (LSE: LLOY) share price has seen a healthy recovery. With the FTSE 100 stock up over 60% the past year, the release of its half-year results for 2021 saw the share price fall slightly. However, with UK growth forecasts looking positive, is August an opportunity for me to buy Lloyds shares?

Reinstated dividends

After initially halting dividends last year, a decision required by its regulator, Lloyds announced in its latest set of results that a further 0.67p per share is going to be paid to shareholders. That takes dividends over the past year to 1.24p. With a share price of 45.9p, at the time of writing, that means it offers a dividend yield of 2.7%. Although below the FTSE 100 average, at a time when the business is coming out of a gruelling pandemic, I deem this dividend yield an attractive factor when looking at buying Lloyds shares.

More generally, the half-year results also provided some optimism. While net income rose by 2% (to £7.6bn) from the same period last year, profits were at £3.9bn, a vast improvement from the loss seen in the six months to 30 June 2020. Loans and advances were also up £7.5bn for the period – sat just below £450bn. This ponders the question of whether now is a good time to buy Lloyds shares before we witness a solid bounce back, inevitably boosting the share price.

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Another beacon of positivity from the results was the recent acquisition of Embark, an investment and retirement platform, for close to £400m. This highlights how Lloyds is diversifying, another positive sign when I’m considering if to buy Lloyds shares.

Lloyds issues

With all the above said, issues with the major bank persist. First of all, and as my colleague Alan Oscroft mentioned, Lloyds operations are focused heavily in the UK. While this can provide opportunities, as many expect the UK economy to have a strong end to 2021 as we hopefully continue to see Covid cases fall, it also poses issues. Should we see a spike in cases, the UK economy could once again face the problems it has done over the past 18 months. Where competitors have diversified, for example, HSBC focusing its operations within Asia, Lloyds has not done so.

Another issue with competition is that there are now banks that can offer a more dynamic service – a concept many customers may crave after the pandemic. Monzo, for me, is a standout in this respect.