I’d avoid the Lloyds share price. I think this FTSE stock can make me a passive income instead

This Fool is turning his attention away from the Lloyds share price and instead views this FTSE stock as a potential option for a passive income.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

One of the biggest losers of the 2020 economic downturn has been Lloyds Banking Group (LSE:LLOY). Right now I’m still skeptical about the Lloyds share price. I would rather look to build a passive income through FTSE stocks.

In order to achieve a passive income, dividend investing is the way to go. In short, buying stakes in companies that allocate a proportion of their profits to shareholders. This can be a profitable way to increase wealth over time if these regular payments are allowed to compound over time.

Lloyds share price woes

The Big Four banks have all suffered huge loan losses. To cover these losses, all of them have had to set aside billions in loss reserves. As I write this, LLOY sits in the 90’s among the FTSE 100 members for price performance over the last 12 months. Since the beginning of 2020, LLOY’s shares have fallen nearly 45%. Trading for 60p per share on 4 January 2020, shares are currently trading for a paltry 34p. Shares even tumbled to as low as 23p back in September.

Despite a 2020 to forget for Lloyds, it is worth noting it is still one of the Big Four banks in the UK and boasts close to 30m customers. There is still a potential for recovery. The Covid-19 vaccine is being rolled out as well as the fact LLOY does have a decent balance sheet. It is in a position to benefit if and when an economic rebound occurs. However, due to economic uncertainty and external factors, I am currently avoiding the Lloyds share price.

FTSE 250 passive income opportunity

I believe there are bargain dividend payers throughout the FTSE. One I really like the look of right now is Britvic (LSE:BVIC). BVIC is the largest supplier of branded still soft drinks in the UK. It also has operations in Ireland, France, and Brazil. Some of its brands include Tango, Robinsons, and J20. In an exclusive agreement with PepsiCo, Britvic also produces and sells brands such as Pepsi and 7UP.

While the Lloyds share price was taking a battering, BVIC’s share price was slowly recovering towards pre-crash levels. BVIC’s share price is still down marginally from this time last year which I believe makes it more enticing and offers room for growth. Right now I can buy shares for 755p per share which is still approximately 15% less than January 2020.

One of the driving factors behind my admiration for BVIC has been its consistent results and propensity to grow. At the end of November, it announced full-year results. The main headlines were an almost 17% increase in profit. Ultimately this meant BVIC confirmed a 21.6p dividend for the full year which gives it a yield of close to 3%. Additionally, BVIC announced it extended its UK bottling deal with PepsiCo for another 20 years which is a big coup.

My verdict

Despite the economic downturn which consumed the FTSE, I see the soft drinks industry bouncing back nicely. With that in mind, I believe BVIC could increase its dividend payout in the future. If analysts are correct, BVIC’s yield could surpass the 3% mark in the new financial year which makes it even more tempting. I’m going to continue to avoid the Lloyds share price and instead look at other alternatives for 2021 and beyond.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Jabran Khan has no position in any shares mentioned. The Motley Fool UK has recommended Britvic and Lloyds Banking Group. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

The flag of the United States of America flying in front of the Capitol building
Investing Articles

2 UK shares that could rise if Trump wins the Presidential election

These UK shares are among the FTSE 100's most popular stocks. And they could rise in value if Donald Trump…

Read more »

Closeup ruffled American flag representing US stocks and shares
Investing Articles

2 UK stocks that could rise if Harris wins the Presidential election

Royston Wild believes these UK stocks could receive a bump if Kalama Harris wins the Presidency, giving their share prices…

Read more »

Investing Articles

After a 96% plunge, is buying more Aston Martin shares throwing good money after bad?

Just two weeks after buying Aston Martin shares Harvey Jones found himself nursing a painful loss. Yet after recent news…

Read more »

Investing Articles

After crashing 45% in October, should I buy this FTSE 250 share for my Stocks and Shares ISA?

Roland Head explains why he’s tempted to add this risky FTSE 250 turnaround share to his Stocks and Shares ISA…

Read more »

Investing Articles

Could I use a stock market crash to turn £20k into half a mil in just over a decade?

A stock market crash might sound terrifying to some but it can also present a once-in-a-lifetime opportunity to accumulate generational…

Read more »

Investing Articles

Recently released: October’s small-cap stock recommendation [PREMIUM PICKS]

We believe the UK small-cap market offers a myriad of opportunities across a wide range of different businesses and industries.

Read more »

Investing Articles

Here’s how a Stocks and Shares ISA and Lifetime ISA could supercharge my wealth!

Individual Savings Accounts (ISAs) can help UK share investors take their earnings to the next level. And their importance is…

Read more »

A person holding onto a fan of twenty pound notes
Investing Articles

A high-yield dividend ETF and an investment trust to consider this November!

Investors wanting to boost their passive income could benefit from investigating these high-yield funds and trusts, says Royston Wild.

Read more »