Lloyds shares have had mediocre 2022. The first weeks of the year saw the bank’s shares break above 50p as investors geared up for Bank of England rate hikes and the benefits of higher interest rates for Lloyds’ profitability.
However, Lloyds’ foray above the 50p mark was short lived. The tragedy in Ukraine began to unfold and the western world was gripped by a cost of living crisis as energy bills soared.
The Lloyds share price has been in a steady downtrend in 2023, making a series of lower highs, the most recent of which was a failure to break 47.5p.
In November, we questioned whether the Lloyds share price would reach 50p by Christmas. Although there is a possibility this is achieved, the recent pull back from 47.5p will add an additional resistance level to any move to the upside.
Indeed, Lloyds has staged a significant rally over the past 6 weeks, but the 50p level may be a bridge too far before the end of 2022.
Lloyds dividend
Lloyds shares may not be a selection that provides a huge amount of capital appreciation in early 2023. If experts at the Bank of England and UK chancellor are right, the UK is headed for a recession that will impact Lloyds customers and curtail the banks profit growth.
The recession isn’t expected to be deep, but it is expected to be prolonged.
One wouldn’t expect a huge impact on profits as Lloyds will broadly benefit from higher interest rates, but it’s difficult to see a situation where Lloyds profits grow significantly.
A steady level of profit for Lloyds in 2023 means the company will be in a strong position to continue to pay dividends. There is also scope for dividend increases.
Lloyds dividend cover is 3.9x, leaving more than enough room to pay additional dividends to shareholders. Investors should expect a measured approach to increasing dividends by Lloyds and it would be a surprise if payouts aren’t increased incrementally going forward.
A damaging recession could delay a dividend hike but the current 4.4% yield makes Lloyds a solid dividend choice for 2023 with the potential for capital appreciation from a fairly valued Lloyds share price.