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The red-hot Lloyds (LSE: LLOY) share price has lit up my SIPP since I added the FTSE 100 bank in early 2023. My shares are up around 125% since then, of which 70% came in the last 12 months. With dividends reinvested, my total return is now more than 140%.
It’s a great example of how supposedly old-school, blue-chip stocks like Lloyds can deliver both income and growth when events go their way. But I’m not daft. It won’t always be like this. As always with shares, there are ups and downs. So have Lloyds investors had their fun for now?
Stellar FTSE 100 stock
In the short run, they possible have. When I bought the shares, they looked almost too good to be true. The price-to-earnings ratio was around six, while 15 is generally considered fair. The price-to-book ratio was just 0.4. Dirt cheap, in other words.
Lloyds isn’t cheap today. The P/E is 16.7, and the P/B ratio is around 1.25. Neither is dizzyingly expensive, but it’s no longer the bargain it once was.
I also secured a yield of more than 5% back then. Today it’s closer to 3%. Yields are calculated by dividing the dividend by the share price. So when the stock rises, the yield automatically falls. The good news is that Lloyds has been hiking shareholder payouts to compensate, with the recent interim dividend hiked by 15%. The full-year 2025 yield is forecast at 3.44%, rising to 3.97% the year after. So there’s still plenty of income coming.
As for future share price growth, as ever, nobody knows. Movements are impossible to forecast with certainty. That doesn’t stop brokers trying though. Eighteen analysts have predicted the 12-month Lloyds share price, and their pot shots range from 84p to 126p. The median price target is 109.4p, up a modest 4% from today. Add the 3.44% dividend yield, and total forecast return is 7.44%, which would turn £10,000 into £10,744. Better than a savings account, but far below recent gains. If correct. It probably isn’t.
Investing is cyclical
That’s fine. Investing is cyclical. Like football teams, shares go on winning runs. Lloyds has just had a strong one. At some point, it has to take a knock or two.
I’m holding onto my position and reinvesting all dividends to keep building my stake until the next upwards swing. Selling isn’t on my mind. Risks remain, as they always do. Lloyds is heavily exposed to the UK economy, which isn’t exactly thriving. Falling interest rates could squeeze margins, the gap between what banks pay savers and charge borrowers, hitting profits.
But who knows? Everybody is a bit glum right now, but the economy could surprise us, and start growing. If it does, this could power Lloyds shares higher. Nobody can predict the next run, but history suggests it will come. Given time. I think Lloyds is worth considering today, with a long-term view. This may be as good as it gets from now, but in time, there’s a chance it may get even better.
