You can’t always get what you want in this life and what I really, really want to do now is buy more Lloyds (LSE: LLOY) shares.
I bought a few of them last month and the only thing stopping me buying more was that I didn’t have enough money. Christmas was a bit costly, I’m afraid, and the same lack of readies is stopping me buying more Lloyds stock today.
I want more Lloyds shares
I still don’t have enough cash to buy a worthwhile chunk of Lloyds shares but I wish I did, because they look like one of the most tempting FTSE 100 stocks to buy right now.
That may seem counter-intuitive (bordering on crazy) to anybody who looks at how the shares have performed lately. Lloyds shares have fallen 8.69% in the last year, while they are down 29.49% over five years.
The long-term performance is even worse. In 1998, the Lloyds share price peaked at around 485p. Today they trade at a tenth of that, costing just under 48p.
Another reason I may appear crazy for rating shares of Lloyds so highly is that it is a domestic bank focused on small businesses and individuals. Given that the UK is expected to be the worst performing major economy this year, that’s a bad place to be. Especially since the housing market is in trouble, and Lloyds is the biggest mortgage lender.
Yet I believe its many troubles are reflected in the share price, which is currently valued at just 6.4 times earnings. Lloyds has a price-to-book value of 0.6, where 1 is seen as fair value.
Perhaps I’m being naive but I do not anticipate a major house price crash. Property is still in short supply, and the population continues to grow. Housebuilders may slow activity as their margins are squeezed, which will further limit supply.
Top FTSE 100 opportunity
Lloyds should benefit from rising interest rates, which should allow it to widen its net interest margins, the difference between what it pays savers and charges borrowers. Threats of a windfall tax on banks have eased, while there is now some hope that inflation will slow, and energy bills will start to fall in line with natural gas prices.
The main reason I am not too concerned is that I plan to hold my Lloyds shares for a minimum 15 to 20 years, and possibly longer. Even if the share price does not grow dramatically in that time, I will still benefit from its generous dividend policy. The current yield is 4.1%, nicely covered 3.8 times by earnings.
That yield is forecast to hit 5.7% this year with cover still high at 2.7 times earnings, giving hope for further progression. Lloyds is finally picking up its former mantle as a dividend aristocrat. I want my share of that and will treat any share price growth as a bonus. Given today’s low entry price, I expect that growth to be plentiful.
If only I had the money to buy it. Maybe next month.
The post If I had £1k to invest today I’d buy more Lloyds shares appeared first on The Motley Fool UK.
Harvey Jones holds shares in Lloyds Banking Group. The Motley Fool UK has recommended Lloyds Banking Group. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
Motley Fool UK 2023