As the Lloyds share price flirts with 50p, do I buy more?

All stocks included in the FTSE 100 index, I probably keep the closest eye on it Lloyds Banking Group (LSE: LLOY) Share price history I am not the only one, as Lloyds shares are among the most widely held and heavily traded in London.

The share price touched 50p

I don’t own Lloyds shares, but my husband is buying some for the family portfolio in mid-2022. We bought the shares at a price – including purchase commission and stamp duty – of 43.45 pa.

At Friday’s close, Lloyds stood at 49.48p, so we’re sitting on a paper gain of about 6p a share so far. That equates to a return of about 13.9% over six months or more. I see that as a perfectly reasonable gain from the ‘boring’ value / dividend / share of income.

Then again, Black Horse bank shares have hit a 12-month high, hitting a 52-week peak of 56p exactly a year ago, on January 17, 2022. Then came Russia’s invasion of Ukraine, which hit global stock markets. Thus, over a year, Lloyds shares have lost around 11.6% of their value, compared to a gain of 3.8% for the FTSE 100.

What’s more, they have fallen 30.8% over the past five years. All these figures do not include cash dividends, which will increase by several percentage points a year. Even so, Lloyds has been a long-term lemon for its long-standing shareholders.

Are Lloyds shares really that cheap?

At the current share price of almost 49.5p, the entire Lloyds group is worth £33.3bn. I don’t see this as a high price to buy the UK’s leading mortgage lender, with 26 million customers across a range of well-known brands. If I could borrow this amount, I would like to buy Lloyds outright today.

And as a fundamental investor, Lloyds shares don’t look expensive to me at the moment, but they don’t look very cheap either. The stock trades at a price-to-earnings ratio of 8.2, for an annualized yield of 12.2%. The final dividend yield is 4.3% per annum covered by 2.8 times.

To me, this suggests that Lloyds’ dividend yield is solid for 2023, even as dark clouds gather on the economic horizon. For example, disposable income is rising – hit by rising inflation, sky-high energy bills and rising interest rates. However, I think the household balance sheet is strong enough to keep Lloyds’ loan losses and bad debts at a reasonable level in 2023-24.

Can I buy it for under 50p?

Now the big question: would I buy the stock at sub-50p? The answer is yes, but not now. This is because we are in the process of building a new stock portfolio. So far, this includes 16 different stocks, of which I want to add at least four more before considering buying duplicates.

In summary, while I see Lloyds shares as reasonably priced right now, we already have a cut, so there is no rush to buy more!