Lloyds Shares Dividend Forecast: A Look Ahead to 2027
According to a recent report by The Motley Fool UK, banks like Lloyds (LSE:LLOY) are among the most popular passive income shares, offering stable cash flows and a long history of delivering yields that trump the broader FTSE 100. The Fool UK’s analysis reveals that Lloyds shares have consistently provided a higher dividend yield compared to the FTSE 100, with the exception of 2020 when the Bank of England demanded UK banks to stop dividends during the pandemic.
The Motley Fool UK’s report highlights that Lloyds’ dividend yield has historically outperformed the FTSE 100, with a current yield of 4.34%. As reported by The Fool UK, “This has resulted in a long history of Lloyds shares delivering yields that trump the broader FTSE 100.” The report also notes that retail banks like Lloyds have limited growth opportunities, which means they tend to pay a greater proportion of their excess capital out in dividends compared to many other UK shares.
However, The Fool UK’s analysis also warns that dividends are never guaranteed, and Lloyds’ progressive dividend policy may be put to the test as Britain’s economy stagnates. According to The Fool UK, analyst forecasts suggest that Lloyds’ dividend per share is expected to grow to 3.59p in 2025, 4.29p in 2026, and 4.84p in 2027, representing a growth rate of 13.2%, 19.5%, and 12.8%, respectively. These forecasts suggest that Lloyds shares could provide a dividend yield of 4.9%, 5.9%, and 6.6% over the next three years, significantly outperforming the FTSE 100 long-term average of 3%-4%.
The Motley Fool UK’s report also highlights that Lloyds’ expected dividends are covered 2.1 or 2.2 times by anticipated earnings, providing a decent margin of safety in case profits are affected by economic conditions. Additionally, Lloyds has a strong balance sheet, with a CET1 capital ratio of 14.2% at the end of 2024, well ahead of its targeted minimum of 13%. As The Fool UK notes, “Lloyds also has a strong balance sheet it can utilise to pay more market-beating dividends.”
Despite the positive dividend forecasts, The Fool UK’s report advises caution, citing concerns about bank earnings, interest rates, and competition in the banking industry. The report also notes that Lloyds’ share price could be affected by an investigation into motor finance, which could result in significant financial penalties. As The Fool UK concludes, “Despite its solid dividends forecasts, I would — on balance — rather find other passive income shares to buy right now.”
The Motley Fool UK’s analysis provides valuable insights for investors considering Lloyds shares as a potential source of passive income. While the dividend forecasts are promising, it is essential to consider the potential risks and challenges facing the company. As The Fool UK’s report emphasises, investors should carefully evaluate their options and consider multiple factors before making an investment decision.
In conclusion, The Motley Fool UK’s report suggests that Lloyds shares could provide a significant and growing dividend income over the next few years, driven by its strong financial position and progressive dividend policy. However, investors must remain cautious and consider the potential risks and challenges facing the company. With its robust balance sheet and solid dividend forecasts, Lloyds shares may remain an attractive option for income-seeking investors, but it is crucial to approach this investment with a critical and informed perspective.
Source:
The Motley Fool UK – “Here’s the dividend forecast for Lloyds shares through to 2027”
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