Up 80% with a P/E of 15 and 4% yield – can the Lloyds share price smash it again in 2026?

The Lloyds (LSE: LLOY) share worth had a rip-roaring 2025. It climbed 80% over the 12 months, and is now up 175% over 5 years. Like the opposite FTSE 100 banks, it’s lastly escaped the shadow of the monetary disaster, and dependable traders are reaping the rewards. So what does the subsequent 12 months maintain?

Lloyds has additionally resumed its mantle as an excellent dividend revenue inventory. But right here the trajectory has been bumpier. Through the pandemic it slashed shareholder payouts twice, by 65% in 2019 and 50% in 2020. A 250% hike in 2021 cheered traders, they usually’ve continued to climb properly, as my desk exhibits.

The trailing yield has fallen to a modest 3.2%, solely barely above the FTSE 100 common, however that’s all the way down to the skyrocketing share worth reasonably than any slackness in rewarding shareholders.

FTSE 100 firepower 

I’m anticipating the dividend per share to rise by round 15% this 12 months, and the forecast yield for 2026 is a extra spectacular 4.2%. Barring shocks, Lloyds appears to be like good or it.

As ever when shares go on a robust run like this, the large query is whether or not it may proceed. Lloyds isn’t as low cost because it was

After I added the financial institution to my Self-Invested Private Pension (SIPP) in 2023, it regarded stupidly low cost. The value-to-earnings ratio hovered round six, properly beneath honest worth determine of 16, whereas with the price-to-book ratio was simply 0.4.

It’s a distinct story in the present day, with a P/E of round 17.5, all this although this falls to 11.6 based mostly on forecast earnings. The P/B is notably larger at round 1.2.

If the Lloyds share worth restoration caught traders off guard, that gained’t be the case in 2026. The catch-up course of is now over. New traders should mood expectations.

Dividend revenue and buybacks

Rates of interest are falling, which is able to hit internet curiosity margins and squeeze financial institution earnings. Decrease charges could re-energise the sluggish UK financial system, and enhance mortgage lending, however nonetheless pose a problem.

Anyone contemplating Lloyds in the present day should take a long-term view. It’s unlikely to shoot the lights out once more this 12 months, however with luck, it is going to steadily construct on its dominance in mortgage and retail banking, to generate secure, steadily rising earnings over time. As all the time, there’s the potential for shocks. The shares wouldn’t escape the impression of a wider inventory market crash, for instance. But when we get one, and Lloyds falls, it could be excessive on my buying record.

I wouldn’t dream of promoting my Lloyds shares in the present day. With luck, I’ll maintain them for all times. I’m reinvesting each dividend I get, and celebrating each share buyback, whereas constructing my stake for retirement. Sooner or later, I’ll take my dividends as revenue.

So whereas Lloyds isn’t the discount it was, I nonetheless assume it’s value contemplating as a part of a balanced Shares and Shares ISA or SIPP portfolio. However I’ll even be trawling the FTSE 100 for the subsequent large restoration inventory, I can see loads of potential on the market.