Lloyds Banking Group has been tipped as holding strong promise for future growth by The Telegraph’s Questor share tipping column, a popular source of ideas for those investing online in ISAs and SIPPs. The column argues that the bank’s share price has been slower to recover from the bank’s brinkmanship with disaster at the height of the financial crisis a decade ago now than the bank itself. Earlier this week Lloyds published a set of 2017 results that it would appear should have provoked more optimism than the £0.70 a share reached on Wednesday. Not only that, but the share price has since slid back to a little under £0.69 at the end of the trading week.
The column’s analyst believes that Lloyds’ share price is currently the victim of negative sentiment that has lingered since the bank disappointed the market. However, it is argued that the problems that Lloyds faced several years ago have long since been resolved and its share price now looks noticeably undervalued.
The dividend prospects for Lloyds shareholders look particularly enticing. At this week’s full year results announcement, the dividend on ordinary shares was raised 20% to 3.05p a share. This is not quite as impressive as it first sounds in the context of last year’s special dividend, that also bumped the overall return per share 3.05p. However, Questor argues that officially boosting the dividend to this level this year can be taken as a positive sign. The bank must be positive that for the foreseeable future 3.05p a share will form the basis for its minimum dividend, not the upper ceiling.
A £1 billion share buy-back scheme was also announced. This should give the remaining shares in circulation a good chance of seeing dividends grow in future years, while proving more resilient if conditions become more testing. It’s also being taken as a sign of the board’s confidence in the bank’s financial solidity.
The other major announcement was a planned £3 billion investment in the bank’s digitalisation and its wealth and insurance businesses. A reinforced and evolved digital banking platform should allow Lloyds to streamline its network of branches, bringing cost efficiencies.
Questor puts the yield on Lloyds shares at around 4.4% between the dividend and share buyback programme however believes there is further room for capital growth over the next couple of years.
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