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a beaten Lloyd’s (LSE:LLOY) share price has become something of a recurring theme. And it seems like an era has passed since the stock put together a period of strong performance.
Lloyds shares make up a large part of my portfolio. However, I wouldn’t question market viewers who were skeptical about why I owned them. To be honest, their performance in the last five years has been disastrous.
But now at around 44p, do Lloyds shares represent one of the best deals out there? Or should I avoid it at all costs?
Recent performance
Well, let’s start by looking at Lloyds’ performance lately.
The business has struggled in recent years as the pandemic and inflationary pressures have hit investor confidence. Five years ago you would have paid 59p for a Lloyds share. Today it costs 25% less than that.
Despite this poor performance, the company has recently provided investors with some positive updates. In its half-year results, pre-tax profits and net income saw significant jumps. What’s more, with interest rates rising to offset accelerating inflation, the company has also benefited from a large increase in its underlying net interest income.
This is because high rates allow Lloyds to charge customers more when they borrow. And while rising impairment charges are a risk, with a large proportion of Lloyds’ income coming from interest-related activities, this has given the business a boost.
Passive income
Additionally, one of the most important factors for me in owning Lloyds shares is the passive income opportunity it provides. As I write, the stock has a dividend yield of 5.7%. And while this doesn’t beat inflation, it’s not far off. It’s certainly better than leaving my money in the bank.
Aside from its dividend alone, I’m also happy to see the steps the company is taking to return greater value to shareholders in the future. More recently, this was seen through plans for a £2bn share buyback scheme.
Of course, while its yield is attractive, it’s worth noting that the dividend can be cut at any time. However, I don’t see this being a problem as the Lloyds payout is covered approximately three times by profits.
A bright future
CEO Charlie Nunn has also begun to focus on business plans for the coming years. For example, he recently announced that Lloyds will invest £3bn over the next three years to diversify its revenue streams. As a fool and therefore as a long-term investor, this is encouraging.
Too cheap to ignore?
So, with all this in mind, are Lloyds shares really a bargain?
Well, I’m optimistic about the long-term prospects for Lloyds. And as such, I think now would be a good time to pick up some shares.
The passive income opportunity is a big draw for me. And with a price-to-earnings ratio of around six, its low valuation is an added attraction.
It may struggle over the next few months as inflation persists. But what worries me most is where the business will be in a few years.
If I had the cash, I would happily buy more shares today.
