Roundtable Discussion; The Future of Mineral Sands. Watch the video here.
Lloyds had moved to quarterly dividends before they were banned. Now the token dividend has been re-introduced - the most allowed according to Lloyds but I don't yet understand how that works. They've said they will provide an update at half year so no more quarterly dividends just yet. This will probably change for next year.
I know they’ll be many investors on here that will disagree with my strategy and call me an amateur (I absolutely am). I will make one comment beforehand to confirm I am not a day trader, and I don’t play to make a quick buck. Good luck to those that do. I’ve seen many comments from people on this board where they have taken advantage of the highs and lows in this share and they’ve made a lot of money from doing so. All I can say to that is I admire your courage and I congratulate your gains. Good luck and long may your strategy pay off.
So back to my question – where will the share price be in 5 years time? I’m going to stick with my target of 74p - now revised to May 2026. I believe this to be conservative and easily achievable especially if we see UK banks catch up with what we’ve seen in the USA.
Lloyds share price is currently a huge discount to its Net Asset Value. The world will learn to cope with COVID, and I’d probably see yearly vaccinations as the norm, but the global economy will recover. I’m struggling to see negative interest rates being used by the Bank of England. I think inflation will return as economies get themselves back on their feet. I don’t think interest rates of 0.75% in 5 years time is a stretch, but banks will do well even with the interest rates being so low. Lloyds is still investing heavily in digital. They’re not Monzo or Starling, but they’re heading in the right direction. I’ve seen some really negative things and some horror stories in terms of bad customer experiences – this is not good. But Lloyds has 30m UK customers; they are going to get things wrong. Lloyds and Barclays are investing heavily here too. When they get things wrong they pay compensation and try to put things right. Is it enough? Maybe not but the large majority of things banks do for us is right. They run 24x7 systems and have some of the most advance IT in the world and are building relationships with Fintechs every day. They have great relationships with companies like Apple and Amazon. Overall customer satisfaction with Lloyds is quite high considering it’s a large nasty bank only out there to make money.
I believe it has a low valuation, a strong financial position and global economies are going to recover. I also think the UK will prove to do well outside of the EU political landscape. Whilst the UK government has made many mistakes in dealing with COVID from the start, we’ve done really well on the vaccination front. This is good for our recovery. I also believe strongly that London will remain as one of the top financial centres in the world; a view shared by Jes Staley @Barclays. It’s not the EU we need to worry about here it’s the likes of the USA and Singapore that will be the main competition.
Apologies for the length of this post.
These are just my thoughts – apologies if I’ve bored anyone. I’d be interested to see other views on the 5 year outlook.
I was looking through a spreadsheet I charted in 2018 where I'd forecast Lloyds divi’s and share price to 2034 based on reinvesting the divi each year. In 2018 I got £9,539.39 based on a divi of 2.14p and 445,579 shares.
From May 2018 with a share price of 63p I forecast for the share price to be 74p, with a dividend of 3.71p awarding me £19,994.99 in 2023. This figure is based on dividends being paid each year, with the dividend being reinvested. Things haven’t gone to plan. The end of year dividend for 2019 was cancelled, the dividend policy now needs to be re-written and we’ve yet to see when dividends will restart.
The big head winds against the banks at the time was PPI and Brexit unknowns – both of which have hurt the banks. Just as things started to look up with PPI coming to an end, Brexit finally happening we were hit with COVID 19, record low interest rates and a BAN on dividends.
My 1st big investment was £37k @89p back in 2015. It was a poorly timed investment and I’ve been down since. I spent £97k @66.75p in May ‘16 and on the same day invested my daughters trust fund £5,000 at the time (losing £2,042 today). I thought these were cheap! Needless to say, it’s been a tough few years sitting on these losses. I’d decided on a long term strategy though; and didn’t want to make the mistake of panicking – which I haven’t. I wasn’t playing the stock market; although I do occasionally dabble. I took a good hard look at where my money was; and decided I still liked Lloyds – still had confidence in the long term outlook for this bank. So I decided to stay. I save £100 a month for my daughter and have at different points since bought into Lloyds for her trust fund. This isn’t every month and sometimes I’ve accessed her money for School or shopping trips when it’s been required and I’ve been short of cash so without anyone tripping me up on her figures as of today she now has 19,611 shares worth £7,741 and she is down by £2,367. I’ve increased her holding over time, averaged down and will continue to do so. There have been a few points where her shares have been in profit. As for my Lloyds holding I’ve brought my average down to 57.56p and now have a holding of 500,000. I’m sticking around. 40p is not a target for me, 50p is not a target for me. When dividends return I see these prices as cheap and an opportunity to further reduce my average in the short-term with a view to benefitting all the more in the long-term. I’ve seen some views that the lows we’ve seen in the last 12 months have been like buying Amazon in 1997. Whilst I don’t necessarily agree with that I am very bullish on the long-term view of this share, I just wish I’d invested my larger amounts at the cheaper prices we’ve seen.
I think this will depend on any dividend announcement. I'm not sure what they're allowed to pay - whether they're allowed to pay the dividend that was suspended. The bank has plenty of capital to support large dividend payouts - even specials.
I might be dreaming here but if they pay the 2.25 final dividend from 2019 plus a token 1p end of year dividend for 2020 that would give us a nice 3.25p.
I've got my holding at an even 500,000 - which would give a nice dividend of £16,250. If that's announced at the end of year results then 38p will be a soft target. We could easily see 40's territory.
When I wake up however.......
That's a really interesting list. When I look at Major Shareholders on my ii account it shows this:
Moshe Greidinger - 384,429,725 - 28.02%
Israel Greidinger - 384,334,904 - 28.01%
Global City Holdings N.V. - 275,720,505 - 20.10%
I'm thinking I'm looking at out of date figures??
@Eccles - small to average country with no natural resources?
We're the 5th largest economy in the world, one of the only 'nuclear' powers and we have significant natural resources such as coal, petroleum, natural gas, iron ore, lead, zinc, gold, tin, limestone, salt, clay, chalk, gypsum, potash, silica sand, slate, arable land - in which we can feed our entire nation if necessary and we're rich in one of the most essential natural resources - water.
And we're predicted to still be in the top 10 largest economies by 2035 behind the USA, China, India, Japan and Germany - but ahead of France.
I think we'll get an initial token dividend; not because the bank can't afford to fully restore dividends. I'm basing it one the guidance given by the BOE.
I'm only £92k down here this morning. My best position for some time :)
Good luck with your investment. Personally I think you will double your capital, and the dividends will start coming, and growing. I've a long way back on my capital but as I'm in for the long run, I'm selfishly looking forward to using the dividends to buy more cheap.
@Brassgemini - I wouldn't know over bought signals if it hit me in the face haha.
Over time I've made some smaller trades within my portfolio on Lloyds where I've been in and out. Last week I sold about £15k on a tranche where I was in profit and split that across BP and Glencore reducing my averages there (both of which I also have a paper loss).
What I posted below is just my current position.
Thanks Triflepig - no offence taken. I have done a few trades with portions of my holding to do just that. I do think we'll see some sort of dividend restored in 2021 even if it is nominal. The banks are more cash rich now with their Core 1 ratio's than they've ever been.
I know some would disagree but I would also like to see a combination of share buybacks to reduce the amount of shares in circulation and at todays prices it would make a significant difference to the long term future of the share in my opinion.
I currently have 489,203 shares with an average price of 58.08p. I'm £109,000 down on paper on this share. I have no plans to sell before 2033 - only to add with future dividends from Lloyd's and other investments I have in order to bring down my average and to further build my holding.
I think the bank would like to pay a dividend at that level - and they have the capital to do so. But I've read quite a few articles that whilst the regulator will allow dividends to start being paid again they will be putting pressure behind the scenes to just pay a token dividend in 2021. We may see higher share buybacks - which at these prices could be better for us long term shareholders.