If I had £1k to invest today I’d buy more Lloyds shares

You can’t always get what you want in this life and do I really want to buy something else now Lloyds (LSE: LLOY) shares.

I bought a few of them last month and the only thing that stopped me from buying more was that I didn’t have enough money. Christmas was a bit expensive, I’m afraid, and the lack of readyies stopped me buying more Lloyds stock today.

I want more Lloyds shares

I still don’t have enough money to buy an expensive piece of Lloyds stock, but I want to, as they seem to be one of the most tempting. FTSE 100 stocks to buy now.

This may seem counter-intuitive (bordering on crazy) to anyone who has seen how the stock has performed lately. Lloyds shares have fallen 8.69% in the past year, while they are down 29.49% over the past five years.

Long-term performance is even worse. In 1998 Lloyds’ share price peaked at around 485p. Today they are trading at a tenth of that, the price is only at 48p.

Another reason I think it might seem crazy to rate Lloyds shares so highly is because it is a domestic bank that focuses on small businesses and individuals. As the UK is expected to be the worst performing major economy this year, it is a bad place to be. Mainly because the housing market is in trouble, and Lloyds is the biggest mortgage lender.

But I believe many of the problems are reflected in the share price, which currently trades at just 6.4 times earnings. Lloyds has a price-to-book of 0.6, where 1 appears to be fair value.

Maybe I’m naive but I don’t expect house prices to drop. Property is still scarce, and the population continues to grow. Homebuilders may slow activity as margins are squeezed, which will limit supply.

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Lloyds should benefit from the rise in interest rates, which should allow it to widen the net interest margin, the difference between what is paid on savings and what is paid on debt. The threat of tax windfall in banks has eased, while there is some hope that inflation will slow, and energy bills will begin to fall in line with natural gas prices.

The main reason I’m not too concerned is that I plan to hold Lloyds shares for a minimum of 15 to 20 years, and maybe longer. Even if the share price doesn’t rise much during that time, I will still benefit from the generous dividend policy. The current yield is 4.1%, well covered at 3.8 times earnings.

The yield is expected to reach 5.7% this year with the cap still high at 2.7 times earnings, giving hope for further progress. Lloyds has finally taken up its former mantle as dividend aristocrat. I want that part and will consider the share price growth as a bonus. Given the current low entry price, I expect growth to be substantial.

If I had the money to buy it. Maybe next month.