The Lloyds (LSE: LLOY) share price has recovered strongly since the stock market crash of 2020. This is because the pandemic effects on the bank have not been as severe as first feared. Further, with initiatives such as the postponement of stamp duty and low interest rates, the housing market also boomed. As the top mortgage lender in the UK, this has benefited Lloyds hugely. So, if I’d invested £1,000 in Lloyds shares in March 2020, how much would I have now?
The figures
In the stock market crash, the Lloyds share price crashed to around 28p. However, since this point, the shares have rebounded to over 50p (they’re priced at 52p as I write). This represents an 85% increase. As such, if I’d invested £1,000 in the shares during the stock market crash, I’d currently have £1,857. This also represents a greater return than the FTSE 100 in the same period, which has risen 44%. Clearly, this shows the value of investing in stocks when there’s fear in the market.
Furthermore, after cancelling its dividend under advice from the Prudential Regulation Authority, Lloyds has since reintroduced it, albeit at modest levels. Total dividend payments since the stock market crash have totalled 1.24p per share. This equates to £44 in extra income, taking the total return to over £900.
Can Lloyds shares rise further in the future?
Clearly, the recovery has been excellent so far. But Lloyds shares are still down around 15% from their pre-pandemic prices, so is there further to rise?
There have been some positive developments for the bank recently. For example, while inflation has led to struggles for a number of FTSE 100 stocks, banks have benefited. This is because the Bank of England has had to raise interest rates to combat inflation, and further interest rate hikes are expected throughout this year. This makes it more profitable to lend.
Secondly, there is scope for the dividend to be raised in the future. Since the pandemic, Lloyds has continued posting strong profits, including net income of £11.6bn for the first nine months of 2021. Such large profits often equate to large shareholder returns, and there is an expectation that the bank will raise its dividend soon. This gives the shares a prospective yield of around 4.5%, making them attractive to income investors.
Even so, there are factors that could see the Lloyds share price decline. For example, many incentives to boost housing demand are now over and higher interest rates may also stifle the appetite for buying a home. This could see the housing market suffer. As Lloyds remains very dependent on a strong housing market, such an event would have devastating effects for the bank.
Would I buy?
Overall, I think Lloyds shares are a very attractive option. While many other companies are struggling with the impact of inflation, Lloyds seems like a prime beneficiary. The boom in the housing market is also showing no current signs of slowing down, despite risks that it could do in the future. Therefore, I may add some Lloyds shares to my portfolio.
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Stuart Blair has no position in any of the shares mentioned. The Motley Fool UK has recommended Lloyds Banking Group. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
