The Lloyds share price has remained frustratingly subdued since their earnings updates a couple of weeks ago and the dark clouds gathering above the UK economy suggest Lloyds shares could stay depressed in the immediate future.
The capital appreciation element from investing in Lloyds may be postponed as we move through the winter months into the spring, at which time we may see a shift in monetary policy, lower inflation rates, and overall market sentiment.
Lloyds shares may trade within their 40-43.5p range for an extended period meaning investors would have to rely on dividend income as compensation for the wait.
Third quarter profits at the bank were robust enough to support the share price, but provisions for bad debts were a warning of economic uncertainty.
However, there is undoubtedly the chance Lloyds jump back above 50p on positive developments in the UK economy, and the 4.7% Lloyds dividend yield adds an extra attraction for investors.
Lloyds Dividend
The bank has gone ex-dividend in early to mid April in the past two years and investors will be eyeing their final dividend payout next year which makes up the lion’s shares of their payout during the year.
Lloyds paid 1.33p as final dividend earlier this year and investors will be hoping this is at least maintained after the benefits of higher interest rates on profits.
Much will rest on the health of the UK economy and the level of future provisions Lloyds will have to make for bad debts, as well as demand for mortgages.
News today that UK house prices were falling will be a cause for concern, but many experts predicts any downside in UK house prices will be minimal.
With a yield of 4.7%, Lloyds has a better yield than the majority of FTSE 100 shares and is well covered at 3.9x. This means there is plenty of space to increase the dividend – should profits hold at current levels.
Lloyds share price was trading at 42.7p at the time of writing; up 1.7% on the day but down 10% year to date.