Lloyds dividend reinstatement

[MickR]

Hi

what are peoples thought on Lloyds reinstating their dividend to 2019 levels any time soon? They paid out 3.21p per share then, which would give a yield of 7.36% on todays price. Thinking of spending half my ISA on them, to lock in the potential yield with probable growth included.

Mick

[IanTHughes]

what are peoples thought on Lloyds reinstating their dividend to 2019 levels any time soon? They paid out 3.21p per share then, which would give a yield of 7.36% on todays price. Thinking of spending half my ISA on them, to lock in the potential yield with probable growth included.

Why do you appear to believe that buying Lloyds Banking Group plc (LLOY) will both provide a high yield as well a capital growth?

I am not saying you are wrong, I have not even looked at LLOY for years. I am simply interested in what you have learned that appears to be leading you to what could be said to be rather a radical decision - investing half one's ISA subscription into one single holding.

Will you enlighten us?


Ian

[absolutezero]

Lloyds would not be my first choice.
Nor any bank for that matter.
Over zealous regulation (being, in my view, a block on dividends and earning power) make me not want to be topping up my small LLOY holding.

[Breelander]

what are peoples thought on Lloyds reinstating their dividend to 2019 levels any time soon?

No, certainly not any time soon. It was the PRA that told all banks to stop paying dividends. Now the PRA have allowed dividends to resume, but have set strict guidelines as to how much can be paid.

With the removal of the PRA’s request not to make shareholder distributions, it is for bank boards to determine the appropriate level of distributions. Any distributions should be prudent, reflecting the still elevated levels of economic uncertainty and the need for banks to continue to support households and businesses through the continuing economic disruption, even in the event that this disruption is more prolonged and severe than currently anticipated....

...The PRA has designed the guardrails above in line with its primary objective to promote the safety and soundness of firms we regulate and it is the responsibility of banks’ boards to make distributions which are consistent with this objective. Accordingly if any firm wishes to make shareholder distributions in excess of these guardrails, it should engage with its supervisors and expect a high bar for justifying any exceptions.

https://www.bankofengland.co.uk/prudent ... e-uk-banks

You only need to look at Barclays' resumed dividend to see the levels to expect from any bank....

0.68% yield. Barclays, you are spoiling us.
Let's see if Lloyds (which I hold) will be equally generous.

viewtopic.php?p=387627#p387627

[Dod101]

Bree is not given to being particularly selective, but from the same PRA guidance of December 2020, the following appears:-

'The PRA intends to transition back to its standard approach to capital-setting and shareholder distributions through 2021. Under this framework, bank boards are responsible for making distribution decisions subject only to the standard constraints of the regulatory framework, including the regular annual stress test.'

That is a little more optimistic re bank dividends, and it just depends how long this 'transitioning' is going to take. Even then although Banks I think are capable of paying higher dividends than those about to be paid, it would be a real optimist who thought that any of them, including Lloyds, will fully reinstate dividends to the 2019 level any time soon (and that includes in 2022)

I do not know and live in hope. I hold only HSBC of the UK banks.

[dealtn]

Bree is not given to being particularly selective, but from the same PRA guidance of December 2020, the following appears:-

'The PRA intends to transition back to its standard approach to capital-setting and shareholder distributions through 2021. Under this framework, bank boards are responsible for making distribution decisions subject only to the standard constraints of the regulatory framework, including the regular annual stress test.'

That is a little more optimistic re bank dividends, and it just depends how long this 'transitioning' is going to take. Even then although Banks I think are capable of paying higher dividends than those about to be paid, it would be a real optimist who thought that any of them, including Lloyds, will fully reinstate dividends to the 2019 level any time soon (and that includes in 2022)

I do not know and live in hope. I hold only HSBC of the UK banks.

Well IF you thought dividends would be restored in 2023, say, and IF you also thought dividends drove the share price, then presumably the 60pish share price in 2019 would be achievable in 2023, which on the current 40pish would represent an approximate 50% return in two years.

[Breelander]

Bree is not given to being particularly selective, but from the same PRA guidance of December 2020, the following appears:-

The PRA intends to transition back to its standard approach to capital-setting and shareholder distributions through 2021....

...That is a little more optimistic re bank dividends, and it just depends how long this 'transitioning' is going to take....

....I do not know and live in hope. I hold only HSBC of the UK banks.

Maybe it's the pessimist in me, but I fear it's going to take a long time....

(holds LLoyds and Barclays)

[tjh290633]

Perhaps we should look at the various statements made by LLOY itself.

In https://www.investegate.co.uk/lloyds-ba ... 00033189I/

In order to help us to serve the needs of businesses and households through the extraordinary challenges presented by Covid-19, the board has decided that until the end of 2020 we will undertake no quarterly or interim dividend payments, accrual of dividends, or share buybacks on ordinary shares. In addition, in response to a request from the PRA and to preserve additional capital for use in serving our clients, the board has agreed to cancel payment of the final 2019 dividend in relation to ordinary shares. Accordingly, resolution 17 in relation to the declaration of that dividend will be withdrawn from the AGM, scheduled to take place on 21 May 2020. Our board will decide on any dividend policy and amounts at year-end 2020.

In https://www.investegate.co.uk/lloyds-ba ... 00041120Q/

Dividend

Following a request made by the PRA to large UK banks in March 2020, the Group suspended the payment of dividends on ordinary shares for the remainder of the year and cancelled the payment of the final dividend for 2019. These actions were undertaken as a precautionary measure to preserve capital as the spread of the coronavirus pandemic led to a UK-wide lockdown, with the potential to create a significant and prolonged downturn.

In December 2020, the PRA announced that dividend payments could recommence, provided that this was subject to a prudent framework for the setting of such distributions. As a result the PRA has established a cap on distributions for year end 2020.

Given the Group's strong capital position at the year end and the regulator's clarification that banks may resume capital distributions, the Board has recommended a final ordinary dividend of 0.57 pence per share, the maximum allowed under the PRA's guidelines.

The PRA has additionally noted its intention to provide a further update on distributions ahead of the 2021 half year results for the large UK banks. It is expected that the PRA will take account of the outcome of the first stage of the Bank of England 2021 solvency stress test exercise in informing its approach to half year distributions. Ahead of the update at half year, dividends may be accrued for via capital, provided this is undertaken on an appropriately prudent basis, but may not be paid.

The Group will update the market on interim dividend payments with the half year results, following receipt of the update from the regulator and based on macroeconomic conditions at the time.

The Board remains committed to future capital returns. In 2021, the Board intends to accrue dividends and resume its progressive and sustainable ordinary dividend policy with the dividend at a higher level than 2020. As normal, the Board will give due consideration at year end to the size of the final dividend payment and any return of surplus capital in addition to the ordinary dividend, based on circumstances at the time.

I don't think that we need to speculate on what might or might not happen.

TJH

[Padders72]

I am not sure I follow. Those RNS statements indicate that dividends will be resumed, but they don't offer much clarity on at what level (other than saying at a higher level than 2020 which doesn't help a lot since it was curtailed) so a little speculation is perhaps understandable.

[tjh290633]

I am not sure I follow. Those RNS statements indicate that dividends will be resumed, but they don't offer much clarity on at what level (other than saying at a higher level than 2020 which doesn't help a lot since it was curtailed) so a little speculation is perhaps understandable.

You will just have to wait for the Q1 figures from Lloyds. If they decide to resume Quarterly dividends, which it had been their intention to pay in 2020, you will know then. 28 April 2021 according to https://www.lloydsbankinggroup.com/inve ... endar.html

TJH

[Arborbridge]

I am not sure I follow. Those RNS statements indicate that dividends will be resumed, but they don't offer much clarity on at what level (other than saying at a higher level than 2020 which doesn't help a lot since it was curtailed) so a little speculation is perhaps understandable.

My reading is that TJH is saying: "don't speculate, instead wait for some more statements".
That's one point of view, but it does rule out being ahead of the curve. I've always found waiting for hard news means forever being behind the curve (on good or bad news) but you have to set that against the dangers of second guessing which is what the OP is asking us to do.

For what it's worth, I doubt I would put half my ISA allowance into one share, ever, and as for Lloyds specifically: I've been waiting for it to "come right" since not long after 2007 when I bought at over 500p. There always seems light at the end of the tunnel, but the tunnel length extends as one approaches the end.
Why do I hold on? As a HYP experiment, or one might say I am a victim of the sunk cost fallacy.


Arb.