The Lloyds (LSE: LLOY) share price has been trending upwards. In the last week, it’s jumped 3.1%. In the past month, it’s climbed 17.3%.
That’s a big difference to what shareholders, myself included, have come to expect in the last five years. During that time, the stock has struggled. In fact, it’s lost 21.2% of its value.
But now at 48.5p, Lloyds looks like it’s closing in on the 50p mark. The last time it was at that price was over a year ago.
I think it could be one of the best bargains on the FTSE 100. Is now the time for me to buy more shares before it goes on a tear?
Momentum
To answer that, I want to know what’s provided the Black Horse Bank with this momentum. Investors have been waiting for the stock to kick on for years. What’s changed in the last month?
Well, its 2023 results certainly helped. Pre-tax profits soared 57% year over year to £7.5bn. That’s the highest it has been for over two decades. This was largely fuelled by a 5% rise in its underlying net interest income.
A bargain in plain sight?
That’s pleasing to see. But the reason I own Lloyds is for its dividend. It boasts a 5.7% yield covered nearly three times by trailing earnings.
In its latest release, CEO Charlie Nunn spoke of how its strong performance “enabled strong capital generation and increased shareholder distributions”.
With a 15% hike in its dividend last year, as well as a new share buyback programme of up to £2bn, the bank seems to be delivering on its word.
Lloyds also looks cheap as chips. Right now, its trading on just 6.4 times earnings. On top of that, its price-to-book is 0.65.
Hold your horses
That said, I’m conscious of a few issues. Firstly, the business has been provided a boost by a rise in its net interest margin due to higher interest rates.
While Huw Pill, the Bank of England’s chief economist, recently said that rate cuts were still “some way off”, this bounce won’t last forever. Rates will inevitably fall, and Lloyds profits could follow suit.
It has also been forced to put £450m aside from its involvement in a car finance scandal. There are talks that this could be similar to the PPI scandal. I’m doubtful of that. However, of all the banks involved, Lloyds has the largest exposure. This uncertainty will cause issues for its share price.
I’ll keep buying
But for a business of Lloyds’ quality, its shares look too cheap, right? I’d argue so. I largely own the stock for the passive income. And as long as its share price remains cheap, I’ll keep reinvesting the dividend payments I receive into buying more undervalued shares.
The stock could break the 50p barrier next week, next month, or even next year. In all honesty, I’m not too fussed. My plan is to keep topping up on Lloyds shares if I have the spare cash. I think it could be a real long-term winner in my portfolio.
