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Anyone who had the foresight (or luck) to buy Lloyds Banking Group (LSE: LLOY) shares at any point since 2019 should be a happy bunny. The Lloyds share price has soared following its collapse during 2020’s Covid-19 crisis. But after such strong growth over five or six years, surely the future looks less bright for Lloyds shareholders? Here are my thoughts…
Lovely Lloyds shares
I remember the stock market crash of 2020 extremely well, as I’d just returned to writing for The Motley Fool just as the market hit rock bottom in March 2020. From 2020’s peak to low, the FTSE 100 and S&P 500 indexes crashed by around 35%. Back then, my wife and I poured cash into UK shares and US stocks, absolutely convinced that both markets were crazily undervalued.
Although global stock markets quickly rebounded from their spring 2020 lows, the Lloyds share price didn’t bottom out until the autumn. On 22 September 2020, shares in the Black Horse bank hit an intra-day low of 23.58p. Anyone buying at that troubled time would have more than quadrupled their money since, with juicy cash dividends on top.
As I write, Lloyds shares stand at 99.88p, valuing this big British bank at £58.9bn. The share price has been even higher in 2026, having hit 101.75p on Tuesday, 6 January. This leaves this popular and widely held stock up 85.4% over one year and a whopping 171.2% over five years (excluding dividends).
I’m a happy holder
For the record, my family portfolio owns this FTSE 100 stock, paying 43.5p a share in mid-2022 for our holding. To date, we are sitting on a paper gain of 129.8%, plus many dividends to boot.
I’m surprised such a ‘boring, old-economy’ stock has generated such impressive returns over the past 3½ years. We bought Lloyds shares for their then-generous dividend yield, which has fallen steeply as the share price soared. Then again, as a long-term value investor, I’ll happily take my profits however they come.
Speaking of dividends, the Lloyds payout rose sharply from 2p for 2021 to 3.17p for 2024, a leap of 58.5% in three years. I expect this shareholder reward to keep rising modestly — maybe growing at high single-digit percentages.
Lloyds isn’t cheap anymore
At current price levels, these shares trade on almost 15.2 times historic earnings, delivering an earnings yield of 6.6% a year. This means that the dividend yield of 3.3% a year is covered twice by trailing earnings, which is a strong margin of safety.
To me, these don’t resemble the fundamentals of a screaming buy. For example, when we bought Lloyds shares, the dividend yield was almost twice its current level. Furthermore, the share price is almost twice its 2025 low of 52.43p, hit almost a year ago on 10 January 2025.
What next for this Footsie stock? With interest rates expected to fall this year and the housing market looking weak, I’m not expecting too much excitement in 2026. Perhaps a peak of 115p for a further gain of 15%, but who knows? But though Lloyds shares are no longer a bargain buy, it might take another crisis to convince me to sell our stock!
