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Of all the actions included in the FTSE 100 index, I probably keep a closer eye on the Lloyds Banking Group (LSE: LLOY) share price. I’m not alone, as Lloyds shares are among the most widely held and traded in London.
Stock price is touching 50p
I personally do not own Lloyds shares, but my wife bought some for our family portfolio in mid-2022. We bought these shares at a price, including purchase commission and stamp duty, of 43.45 pa per share.
At Monday’s close, Lloyds stood at 49.48 pence, so we are sitting on a nominal gain of about 6 pence per share so far. That equates to a return of about 13.9% in six months or so. I see it as a perfectly reasonable gain from a ‘boring’ value/dividend/income share.
On the other hand, Black Horse bank shares have been up for 12 months, reaching a 52-week high of 56 pence exactly one year ago, on January 17, 2022. Then came the Russian invasion of Ukraine, which crashed the stock markets. world. Thus, in a year, Lloyds shares have lost around 11.6% of their value, compared to a gain of 3.8% for the FTSE 100.
Moreover, they have decreased by 30.8% in the last five years. All of these figures exclude cash dividends, which would boost them a few percentage points a year. Still, Lloyds has been a long-term lemon for its long-suffering shareholders.
Are Lloyds shares really cheap?
At the current share price of almost 49.5p, the entire Lloyds group is valued at £33.3bn. I don’t see this as a high price to buy the UK’s leading mortgage lender, which has 26m customers across a range of well-known brands. If I could borrow this sum, I would gladly buy Lloyds today.
And as a fundamental investor, Lloyds shares don’t look expensive to me today, but they don’t look incredibly cheap either. The stock is trading at a price-earnings ratio of 8.2, with an annual earnings yield of 12.2%. Final dividend yield of 4.3% per annum is covered 2.8 times by earnings.
To me, this suggests that Lloyds’ dividend yield is rock-solid for 2023, despite dark clouds hanging over the economic horizon. For example, disposable income is plummeting, hit by skyrocketing inflation, skyrocketing energy bills, and rising interest rates. However, I think household balance sheets are strong enough to keep Lloyds’ credit losses and bad debts within reasonable levels in 2023-24.
Would you buy for under 50p?
Now the big question: would you buy these shares for less than 50p? The answer is yes, but not now. That’s because we’re in the process of building a new stock portfolio. So far this includes 16 different stocks, to which I’d like to add at least another four before considering duplicate purchases.
In short, while I see Lloyds shares as reasonably priced at the moment, we already own a portion, so there’s no rush to buy yet more!
