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Am I crazy to think of Lloyds Banking Group (LSE: LLOY) share in terms of loving them?
Lloyds has lost me a bundle of cash in the last 10 years. And we should keep emotions away from our investments, right?
But it would surely take a robot to look at the Lloyds share price chart and maintain a steely cool.
I love that dividend
Those of us who invest for long-term income love a good dividend, don't we?
We're looking at a Lloyds dividend yield forecast of 5.9%, with punters putting it above 7.5% by 2025. What's not to love about that?
I see NatWest Group with an even higher yield of 6.9%. And again, the forecasts show that it will continue to go up and up. Do I see another competing for my affections?
The banking sector in general has what appears to be some of the best FTSE 100 dividends on offer. And they're backed by expected earnings increases.
Falling stocks
If we want to buy something, we love it to be cheap, right? It's like investor Warren Buffett said about hamburgers. If we want to continue consuming them, we should be happy when meat prices drop.
So if I want to keep buying Lloyds shares, I should also want them to keep getting cheaper. But it's harder to pull yourself together and stay calm.
I have reloaded my Lloyds shares several times, each time at a lower price. But many investors have continued to pour money into falling stocks only to see them go bankrupt and lose everything.
How do I know I'm not doing the same thing with Lloyds shares, based on some sort of intuition that I must be right?
So cheap?
Well, never forget the rating. Lloyds' price-earnings (P/E) ratio is just six. That's very low by Footsie standards.
NatWest looks equally cheap. Oh and Barclays It has a P/E of just over five. Hmm, I may not have enough love to hang around here.
The P/E alone can be misleading. And a very low one may be valid, especially if the outlook is poor. So I want to look at liquidity, forecasts, cash flow and everything else.
And I see risks with banks in today's economy. Lloyds may be more at risk than most, due to its exposure to the property market – it is the UK's largest mortgage lender.
Balance
So yes, I want to buy more Lloyds shares again. And I know there's a very real chance they'll drop again after I buy them. If bad loan impairments are large this year, Lloyds could fall further than I fear.
I also know that it is simply not possible for me to put aside all emotions and analyze everything 100% rationally.
I think the key is to keep a balance and not get too excited about the riches I think Lloyds could one day bring me. And I don't want to turn my back on the emotional appeal of the stock market: it's all part of the fun.
