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Investing in Lloyds Banking Group (LSE: LLOY) shares hasn’t been probably the most thrilling commerce over the past 5 years, however the banking inventory has quietly delivered some fairly spectacular returns.
For traders that managed to choose up shares again in October 2020 and held on till now, a recovering share worth and regular dividends have given them a purpose to smile.
What’s occurred to the Lloyds share worth?
Within the wake of the COVID-driven 2020 market crash, Lloyds shares have been languishing at 27p on 2 October 2020. Buyers have been nonetheless spooked by financial uncertainty, low rates of interest impacting on margins, and UK banks pausing dividends.
However the story from there was one in every of a gradual restoration and bumper 2025. With rising rates of interest and the financial system stabilising, the corporate’s valuation has bounced again in an enormous approach.
As I write on 1 October, Lloyds shares are sitting at 83p. That’s greater than a tripling in worth over 5 years, which is a superb consequence for a gentle if unspectacular member of the FTSE 100.
Throw within the dividends and issues look even higher. In 2020, the payout was a modest 0.57p per share, which was the utmost permitted by the regulator on the time.
Issues have picked up since then, climbing to three.17p in 2024 and 1.22p in 2025, to date. All in all, traders have been paid a contact over 12p per share within the final 5 years.
That brings us to the full return calculation for Lloyds shares within the final 5 years. Buyers that purchased £100,000 shares at 25p in October 2020 would have netted 400,000 shares.
At at this time’s worth of 82p, that will be value a tidy £328,000. Throw in 12p per share (£48,000) of dividends over that interval and also you get a £370,000 return.
Valuation
Regardless of the share worth climb, Lloyds nonetheless trades on modest fundamentals. It provides a ahead dividend yield within the area of 4%, which is a contact larger than the Footsie common.
The financial institution’s trailing price-to-earnings (P/E) ratio of 12 is low in comparison with the Footsie however above the monetary sector common. The corporate’s price-to-book (P/B) ratio hovering above one, which suggests the market isn’t seeing it as a worth play.
In fact, there are causes for that warning. Lloyds has confronted scrutiny over its publicity to the UK mortgage market, and extra lately, it put aside one other £700m linked to the automobile finance fee scandal.
These points haven’t derailed the corporate’s share worth, however I think they might dampen valuations going ahead.
My verdict
Wanting on the final 5 years, Lloyds has been a quietly robust performer. From a depressed start line, the shares greater than tripled, and while you add in dividends, the full return is near 270%.
That’s a greater final result than many would have anticipated again in 2020, when sentiment round banks was poor and revenue seekers have been starved of dividends.
Regardless of that, I don’t suppose the present outlook is risk-free. Regulatory headwinds and a cooling housing market may hit income. Nonetheless, there’s little doubt that traders fortunate sufficient to purchase the dip in October 2020 have loved a tidy revenue from their funding in Lloyds shares over the past 5 years.
