Earlier this week, I noticed that the Lloyds Banking Group (LSE: LLOY) share price was closing in on its 52-week high. As I write, shares in the Black Horse bank are trading at 63.68p, just 1.5% below their one-year peak of 64.67p, hit on 5 August 2024.
The Lloyds share price thrashes the FTSE 100
With the bank’s stock riding high, the group is now valued at £38.63bn, more than 2.5 times its five-year low during Covid-hit 2020. The recent price strength was boosted by a strong surge since 10 January 2025, when it leapt by more than a fifth (+20.4%).
As a result, the shares are up a mighty 53.8% over the past year — an outstanding performance from one of the FTSE 100‘s long-term laggards. That said, the share price has risen by only 12.5% over the last five years, trailing the Footsie‘s 18.9% gain.
We own this stock
For the record, my family portfolio bought Lloyds shares at the end of June 2022, paying 43.5p a share. Therefore, our stake is now worth 46.4% more. That’s a pretty decent return and broadly in line with what I hoped to make in our first three years of ownership.
What’s more, this capital gain is a big bonus, because we originally bought this stock as a pure dividend play. Even though the share price has since climbed, the shares still offer a market-beating dividend yield of 4.6% a year, ahead of the FTSE 100’s 3.6% annual cash yield.
Why would I worry?
As a long-term value/income investor, close to four decades of equity investing has turned me into something of a contrarian. Indeed, having lived through the stock-market crashes of October 1987, 2000-03, and 2007-09, I know too well that bull markets always end. That’s why I try not to fall in love with rising markets and individual stocks.
As a result, I get excited when share prices fall, because this allows me to buy into good companies at lower prices. Conversely, when share prices soar, I brace myself for the next tumble. Furthermore, while I’m keen to buy cheap shares, I also find it difficult to sell shares that may have become overvalued. Ho hum.
So should I sell?
I will say that I’m not a big buyer of Lloyds stock at current price levels. For me, there are cheaper blue-chip shares offering superior dividend and earnings yields. However, I don’t see myself selling our stake for the near future, either. I now view Lloyds as a ‘middle of the road’ stock, but with potential for further gains on good news.
Meanwhile, we will continue to reinvest our half-yearly dividends into buying yet more shares. I see this as a great way to increase the future value of our holding with no effort required.
Finally, there may be a rocky road ahead for the Lloyds share price, especially if UK inflation — the rising cost of living — continues to cool. This would allow the Bank of England to cut its base rate, bringing down borrowing costs for individuals and businesses. Lower interest rates means less interest income and lower lending spreads for banks. And this might hit Lloyds’ 2025-26 profits and cash flow!
