Lloyds Dividend: Dates, Forecasts, and Analysis

UK banks stocks are among the top-performing companies in 2024, with Lloyds (LSE:LLOY) and its dividend getting a boost. Improving economic conditions, rising financial markets, and improved demand for lending services from businesses are creating powerful tailwinds.

But where are Lloyds dividends going in the future? And what are the main risks for investors to keep an eye on? Here are all the details.

When does Lloyds pay dividends?

Lloyds pays dividends to shareholders twice per year. The exact dates on which Lloyds issues dividends to shareholders change each time. However, historically, the ex-dividend dates have been set in the first half of April and August, with actual payments typically around one month later from this date.

In the most recent year, the ex-dividend date for the final payout of the 2023 fiscal year was set on 11 April 2024, with the actual payment occurring on 21 May. The second dividend payment in 2024 had an ex-dividend date of 1 August, with the payment occurring later on 10 September.

What is the dividend payout ratio for Lloyds?

Looking at the latest full-year results for 2023, Lloyds has paid a total ordinary dividend of 2.76p per share. During the same period, the bank generated basic earnings per share of 7.6p. Therefore, the Lloyds payout ratio is currently 36.3%. In other words, the bank is returning just over one-third of profits back to shareholders via dividends.

Comparing this payout to the current share price of 53p reveals that Lloyds shares currently offer an attractive dividend yield of 5.2%. However, changes to shareholder payouts or fluctuations in the stock price can change the yield quickly.

Lloyds dividend history

Prior to the 2008 financial crisis, dividends paid by Lloyds were significantly higher than today on a per-share basis. However, it’s important to note that the bank has since issued significantly more shares to raise capital in the aftermath of the Great Recession.

Between 2009 and 2013, no dividend was paid before it was eventually restored in 2014. However, dividend growth has since failed to emerge. As the bank’s bottom line continuously fluctuated due to its dependence on its investment banking arm to turn a profit, dividends have moved similarly.

What is the Lloyds dividend forecast for 2024, 2025, 2026, 2027, 2028

With interest rates sitting close to 0% for the last decade, Lloyds’ ability to generate profit from its lending activities has been weak. However, following the inflation that emerged in 2021, interest rates have once again increased. And while the Bank of England has started cutting rates as inflation cools off, the market consensus suggests the days of near-zero interest rates won’t be returning any time soon.

For Lloyds, that’s good news, as it opens the door to more consistent earnings. And subsequently, analysts have updated their forecasts, predicting a steady rise in shareholder payouts moving forward.

Suppose these forecasts prove accurate? In that case, it suggests that buying Lloyds shares today could lock in a 9.6% dividend yield over the next four years. However, it’s essential to always take analyst predictions with a pinch of salt.

Banks are complicated entities influenced by a lot of macroeconomic factors beyond their control. As such, earnings growth and, in turn, dividend growth may fall short of expectations. It’s even possible that if another economic disaster struck, dividends could be once again cancelled outright. In other words, investors need to take the risks of investing in Lloyds shares into consideration.

What are the risks of investing in Lloyds?

Investing in a bank comes with a variety of risk factors. Its core lending activities are far from risk-free as the bank has to carefully select who it issues loans to. After all, if borrowers can’t keep up with payments, Lloyds’ cash flow gets harmed.

It’s a similar story with its investment banking division. Recently, the recovering financial markets have created a powerful tailwind that’s helping the entire banking sector rise, with stocks like Barclays and Natwest being some of the biggest beneficiaries, rising by 70% and 82% year-to-date, respectively.

However, a slowdown in the financial markets could equally result in bank stocks reversing course, including Lloyds. That could be especially true considering the ongoing investigation by the Financial Conduct Authority (FCA) into undisclosed commissions surrounding motor financing loans.

The regulatory probe is still ongoing, but it could spell trouble for Lloyds. The bank is one of the biggest motor financing lenders in the UK with an estimated £15bn of borrowings on its books. In other words, Lloyds has a high level of exposure to this investigation. Consequently, management has already put aside £450m to cover any potential penalties. Yet more bearish analysts believe the true cost could be significantly higher if the investigation finds wrongdoing.

Which bank stock pays the highest dividend?

With the share price lagging behind other banks on the London Stock Exchange due to the uncertainty surrounding the FCA’s investigation, Lloyds currently offers a higher yield compared to most of its peers. However, HSBC Holdings is currently in the lead with a 6.6% dividend yield.

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