Lloyds (LSE: LLOY) shares remain one of the most popular investments in the UK. It seems investors like the fact that shares in the bank can be picked up for under £1.
But have Lloyds shares actually been a good investment recently? To answer that question, I’m going to take a look at how much I’d have today if I had invested £5,000 in Lloyds shares five years ago. Let’s crunch the numbers.
Lloyds shares have underperformed
Five years ago, on 14 September 2017, Lloyds shares closed at 66.4p. Today, however, they’re well below that level. Indeed, yesterday, the stock closed at 46.5p.
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That represents a decline of approximately 30% over the five-year period, meaning that if I had invested £5,000 in the stock back then (assuming I bought at the closing price of 66.4p), my money would now be worth about £3,500 (ignoring trading commissions). Ouch!
Don’t forget dividends
Of course, we also need to factor dividends into the equation. These can make a big difference to overall returns.
Here’s a look at the dividends I would have been entitled to if I had bought Lloyds shares five years ago.
| Ex-dividend date | Payment date | Dividend per share | Type |
| 4 August 2022 | 12 September 2022 | 0.80p | Interim |
| 7 April 2022 | 19 May 2022 | 1.33p | Final |
| 5 August 2021 | 13 September 2021 | 0.67p | Interim |
| 15 April 2021 | 25 May 2021 | 0.57p | Yearly |
| 8 August 2019 | 13 September 2019 | 1.12p | Interim |
| 4 April 2019 | 21 May 2019 | 2.14p | Final |
| 16 August 2018 | 26 September 2018 | 1.07p | Interim |
| 19 April 2018 | 29 May 2018 | 2.05p | Final |
In total, I would have been entitled to income of 9.75p. On £5,000 worth of shares (approximately 7,530 shares at 66.4p per share), the dividends would amount to around £734 in total (assuming I didn’t reinvest them).
So, adding that to the capital value of my Lloyds shares, I would now have approximately £4,234. Overall, that equates to a loss of around 15%. Needless to say, the return from the banking stock over the last five years has been quite disappointing.
The lesson from Lloyds shares
Looking at this underwhelming return, there’s an important lesson here – it’s crucial to own a diversified share portfolio.
It’s often said that shares tend to produce returns of 7-10% per year over the long term. But these returns are for the stock market as a whole. To achieve those kinds of returns, one needs to own a diversified portfolio of stocks from a range of different industries. Owning just a handful of stocks (like many private investors do) can produce vastly different returns. And ultimately have a big impact on one’s ability to achieve their financial goals.
This is why I own a well diversified investment portfolio myself. I own a wide selection of stocks from a range of different sectors including technology, healthcare, financials, and consumer staples. In total, I own nearly 50 different stocks.
This doesn’t guarantee I’ll generate strong returns from shares over the long term. But it does improve my chances of doing so. Because if a handful of stocks produce disappointing returns – like Lloyds has recently – it’s not likely to be a disaster. The returns from better performing stocks are likely to offset the poor returns from the underperformers.
Ultimately, diversification is the key to generating solid returns from the stock market.
