It feels like an age that I’ve been waiting for Lloyds (LSE: LLOY) shares to kick on. Could this year finally be that time?
As a shareholder, I’m certainly hoping so. The stock hasn’t got off to the best start so far in 2024. But it could be argued a subpar performance is what we’ve come to expect given recent years.
In the last five years, the Lloyds share price has lost 28.9% of its value. Back then, I would have had to muster up 60p for a share.
Today, I can pick one up for just 42.7p. But is there hope Lloyds can reach the levels it was once at?
A tough year ahead?
Well, 2024 hasn’t been kind to the stock so far. And I’m expecting the upcoming months to be choppy. Following the news that the UK has now officially entered recession, investor sentiment surrounding Lloyds may wobble. That’s especially since the firm is solely reliant on the UK for its revenues.
On top of that, the Black Horse Bank could face a fine of around £1bn from the Financial Conduct Authority due to its involvement in a motor loan commissions scandal.
Looking to the future
Lloyds has struggled in recent times. But I don’t want to dwell on the past. That’s been and gone. Where could its share price be five years from now? That’s what I’m concerned about.
Of course, that’s a difficult question to answer. But going off what I know today, I’m confident that the stock is in a good position to perform well.
There are a few reasons I think this. To start, it looks severely undervalued in my eyes. Right now, it trades on a price-to-earnings ratio of just 7.6. That’s a considerable way off from the FTSE 100 average of around 11. If you ask me, I think Lloyds looks like a bargain.
There are other ways to value Lloyds, too. For example, I can look at its price-to-book ratio, which compares its market valuation with its net asset value. Where one is considered fair, Lloyds comes in at 0.5. That signals the stock may be undervalued by as much as half.
Cash on the side
Alongside a cheap valuation is the opportunity for me to make some passive income with Lloyds’ 5.9% dividend yield. That’s above the FTSE 100 average of around 3.9%. And while dividends are never guaranteed, its dividend is covered around three times by earnings, so I’m confident of a payout.
Looking ahead, analysts also predict its dividend could potentially rise to 3.71p by 2026.
A recovery?
So, will 2024 finally be the year that Lloyds shares recover?
I think so. I’m bracing myself for further volatility in the months to come. However, as interest rates hopefully begin to fall in the last quarter of 2024 and investor sentiment picks up, I think we could begin to see Lloyds surge.
I already own the stock. But with any spare cash I have in the weeks and months to come, I’ll be looking to continue snapping up undervalued Lloyds shares.
