[ad_1]
Image source: Getty Images
Investors have been riveted by Space Exploration Technologies Corporation, or SpaceX, but they might feel happier checking out Lloyds (LSE: LLOY) shares instead. The FTSE 100 bank has had an absolute stormer but risks flying under the radar.
The SpaceX share price has crashed almost 50% since peaking at around $225 on 16 June, four days after its record-breaking IPO. This was always going to be a bumpy ride, and so it’s proved. This is why I dodged Elon Musk’s interstellar venture on the launch pad, and waited for the stock to find its true value. In the meantime, I let my Lloyds shares roll, and they’re gradually making me even richer. And with a lot less noise.
Why is this FTSE 100 bank flying?
The Lloyds share price is up 45% over the last 12 months and a stunning 149% over five years, with dividends on top. If reinvested, that will have lifted the total five-year return past 175%.
I think it’s worth waving the flag for Lloyds, because too many UK investors get distracted by the US tech mega-caps and fail to understand just how rewarding UK blue-chips can be over time. I can see several reasons why Lloyds has been flying.
Higher interest rates have allowed all the banks to widen their net interest margins, the difference between what they pay saves and charge borrowers. The UK economy has struggled but nervous consumers are buying savings products and mortgage demand has been resilient.
The gradual restoration of the dividend has given investors another reason to buy Lloyds shares. They’re benefiting from share buybacks too, with £1.7bn programme in 2025 and £1.75bn this year.
The bank’s statutory pre-tax profits have been solid.
- 2025 – £6.7bn
- 2024 – £6.0bn
- 2023 – £7.5bn
- 2022 – £6.9bn
- 2021 – £6.9bn
Recent dips are partly down to the motor finance scandal, which forced Lloyds to set aside £1.95bn to cover potential compensation and operational costs.
Lloyds isn’t a one-way bet. No stock is. As we saw in the financial crisis, the sector can be volatile.
So what are the risks?
Lloyd is now focused almost entirely on the UK economy, which is struggling. The problems could worsen if the Iran war intensifies, and inflation and interest rates climb. That could squeeze customers, hit mortgage demand and potentially drive up loan impairments.
Perhaps inevitably, Lloyds shares are more expensive than before with a price-to-earnings ratio of 16. The forward P/E is a more modest 11.4 though, due to an anticipated rise in earnings.
The trailing dividend yield has dipped to a more modest 3.2%, again, thanks to the rising share price. Yet the board has been generous, hiking shareholder payouts by around 15% annually in recent years. The forecast yield for 2026 is a more sturdy 3.79%, rising to 4.47% in 2027. Dividends aren’t guaranteed, of course.
Lloyds shares may slow after recent excitement but I still think with a long-term view, this FTSE 100 star remains well worth considering. I’m keeping an eye on SpaceX but won’t be buying that right now.
Should you invest £5,000 in Lloyds Banking Group Plc right now?
When investing expert Mark Rogers and his team have a stock tip, it can pay to listen. After all, the flagship Twelfth Magpie Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.
And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Lloyds Banking Group Plc made the list?
Harvey Jones owns shares in Lloyds Banking Group.
[ad_2]
Source link