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Investing in Lloyds Banking Group (LSE: LLOY) shares hasn’t been the most exciting trade over the last five years, but the banking stock has quietly delivered some pretty impressive returns.
For investors that managed to pick up shares back in October 2020 and held on until now, a recovering share price and steady dividends have given them a reason to smile.
What’s happened to the Lloyds share price?
In the wake of the COVID-driven 2020 market crash, Lloyds shares were languishing at 27p on 2 October 2020. Investors were still spooked by economic uncertainty, low interest rates impacting on margins, and UK banks pausing dividends.
But the story from there has been one of a gradual recovery and bumper 2025. With rising interest rates and the economy stabilising, the company’s valuation has bounced back in a big way.
As I write on 1 October, Lloyds shares are sitting at 83p. That’s more than a tripling in value over five years, which is a great result for a steady if unspectacular member of the FTSE 100.
Throw in the dividends and things look even better. In 2020, the payout was a modest 0.57p per share, which was the maximum permitted by the regulator at the time.
Things have picked up since then, climbing to 3.17p in 2024 and 1.22p in 2025, thus far. All in all, investors have been paid a touch over 12p per share in the last five years.
That brings us to the total return calculation for Lloyds shares in the last five years. Investors that bought £100,000 shares at 25p in October 2020 would have netted 400,000 shares.
At today’s price of 82p, that would be worth a tidy £328,000. Throw in 12p per share (£48,000) of dividends over that period and you get a £370,000 return.
Valuation
Despite the share price climb, Lloyds still trades on modest fundamentals. It offers a forward dividend yield in the region of 4%, which is a touch higher than the Footsie average.
The bank’s trailing price-to-earnings (P/E) ratio of 12 is low compared to the Footsie but above the financial sector average. The company’s price-to-book (P/B) ratio hovering above one, which suggests the market isn’t seeing it as a value play.
Of course, there are reasons for that caution. Lloyds has faced scrutiny over its exposure to the UK mortgage market, and more recently, it set aside another £700m linked to the car finance commission scandal.
Those issues haven’t derailed the company’s share price, but I suspect they could dampen valuations going forward.
My verdict
Looking at the last five years, Lloyds has been a quietly strong performer. From a depressed starting point, the shares more than tripled, and when you add in dividends, the total return is close to 270%.
That’s a better outcome than many would have expected back in 2020, when sentiment around banks was poor and income seekers were starved of dividends.
Despite that, I don’t think the current outlook is risk-free. Regulatory headwinds and a cooling housing market could hit profits. However, there’s no doubt that investors lucky enough to buy the dip in October 2020 have enjoyed a tidy profit from their investment in Lloyds shares over the last five years.
