This year will go down as another disappointing year for shareholders of Lloyds Banking Group (LSE: LLOY). After a promising start to 2023, the Lloyds share price went into reverse, falling steeply between February and October.
The Lloyds share price limps along
As I write on 19 December, Lloyds stock hovers around 46.87p. This values the Black Horse bank at £29.7bn — hardly a hefty price tag for the UK’s leading mortgage lender.
On 30 December, the stock closed out 2022 at 45.41p. It then enjoyed a strong winning streak, hitting its 2023 high of 54.33p by 9 February. But within a month, a short-lived US banking crisis sent financial stocks crashing worldwide.
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After recovering from their March slump, the shares then rebounded, closing at 49.88p on 12 April. Alas, they’ve not been over the 50p mark since. Indeed, they hit their 52-week low of 39.42p on 24 October. The good news is that they have surged since the market bottom on 27 October.
Here’s how the bank’s share price has performed over six timescales:
| Five days | +2.0% |
| One month | +8.9% |
| Six months | +4.1% |
| 2023 to date | +3.0% |
| One year | +4.0% |
| Five years | -9.2% |
I’m surprised that Lloyds stock has produced positive returns over all five periods from five days to 12 months. And I speak as a shareholder, having bought the shares for our family portfolio in June 2022 for 43.5p a share.
Based on the current share price, the D’Arcys are sitting on a paper profit of 7.9% of our initial investment. However, we bought Lloyds shares mostly to generate market-beating dividends for years to come.
We own Lloyds for passive income
Today, this stock trades on an earnings multiple of 8.4, delivering an earnings yield of 11.9%. This means that the bank’s dividend yield of 5.4% a year is covered a healthy 2.2 times by earnings. It’s this decent cash stream that keeps us holding the stock today.
Of course, share prices only tell us about the past and provide almost no information on future corporate valuations. Even so, looking at Lloyds’ fundamentals today, it seems to me that this stock could have much further to climb.
At what price would I sell?
While holding stocks, I sometimes think, “At what price would I be willing to part with this holding?” However, I can rarely answer this question with any degree of confidence. After all, I don’t own a crystal ball and have shown no paranormal ability to predict the future.
Even so, would I be willing to sell our Lloyds shares if they hit, say, £1 in 2024 or maybe 2025? This question is very tricky to answer, firstly because I don’t know what the group’s fundamentals would be at this hypothetical point.
For example, if the shares did hit £1 and yet provided a rising, FTSE 100-beating dividend yield, then why sell and forego this dividend income? Also, after selling, I’d need to find a worthy replacement stock with similar or better fundamentals and outlook.
Summing up, I’d be delighted were the Lloyds share price to touch £1 in 2024/25. That said, I don’t expect this to happen, but I do expect to hold tightly onto this stock!
