Is the Lloyds share price the best banking bet for income investors?

first_imgEPS growth over 5 yearsEPS volatility over 5 yearsDividend growth over 5 yearsDividend coverDividend cuts in last 5 yearsMaintained dividends in last 5 years Image source: Getty Images. James J. McCombie has no position in any of the shares mentioned. The Motley Fool UK has recommended Barclays, HSBC Holdings, and 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. Is the Lloyds share price the best banking bet for income investors? Lloyds Banking Group (LSE: LLOY) shares are popular with income investors. A well-known ISA provider frequently has Lloyds at the top of its most-searched stock list. Lloyds is already well covered here at the Fool, but I think it’s about time I had a look at what the fuss is all about.Paying dividendsIncome investors like Lloyds for its dividends. That’s not surprising considering the trailing dividend yield is around 7%. But is the Lloyds dividend yield safe?5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…And if you click here we’ll show you something that could be key to unlocking 5G’s full potential…Well, it’s high, but not absurdly high, and earnings have been growing faster than dividends, which is good. Lloyds is itself a large market capitalisation company, and its balance sheet looks acceptable. Dividend cover is above 1, which is also acceptable, but not great. I would say its dividends look fairly safe.Lloyds looks like the best dividend bet for British banks. It is top of the class for earnings per share (EPS) growth and volatility. Although second-best for dividend growth, it has not cut its dividend in the last five years as others have. It does have a relatively weak dividend cover metric, but it will be stable in comparison because of the low earnings volatility. James J. McCombie | Wednesday, 4th March, 2020 | More on: LLOY Lloyds2.88%14.8%5.2%0.47 Barclaysn/a10.2%8.5%1.5911 With reference to the table above, Lloyds is more profitable for its shareholders than the other banks, as measured by return on tangible equity, and has average leverage.Lloyds is generating higher net income margin than RBS or HSBC and appears to be doing it with less risky assets. A higher ratio of risk-weighted assets (RWA) to average interest-earning assets (AIEA) tells me that less risky assets are being used. Lloyds has the highest ratio. I could not find the AEIA number for Barclays.Banking on itI can understand why income investors like Lloyds. However, the economy is jittery right now, rate cuts are likely, and that does not bode well for banks. But with annual declared dividends of 3.37p, Lloyds could slash its dividend by 43% to 1.92p, and an investor would still get a 4% yield on the current share price of 48p. That is a bankable margin of safety. Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we’re offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our ‘no quibbles’ 30-day subscription fee refund guarantee. Net income marginReturn on tangible equityLeverageRWA/AIEA Click here to claim your copy now — and we’ll tell you the name of this Top US Share… free of charge! RBSn/a33.7%n/a1.18n/an/a Barclays3.09%9%5.1%could not computecenter_img I’m sure you’ll agree that’s quite the statement from Motley Fool Co-Founder Tom Gardner.But since our US analyst team first recommended shares in this unique tech stock back in 2016, the value has soared.What’s more, we firmly believe there’s still plenty of upside in its future. In fact, even throughout the current coronavirus crisis, its performance has been beating Wall St expectations.And right now, we’re giving you a chance to discover exactly what has got our analysts all fired up about this niche industry phenomenon, in our FREE special report, A Top US Share From The Motley Fool. Lloyds44.6%1.18%5.21%1.0401 RBS1.6%9.4%4.9%0.43 Just a note on the table above: both Barclays and RBS started the five-year period with a loss, hence an EPS growth rate is meaningless. RBS cancelled its dividend entirely from 2008 until 2018 so does not lend itself well to counting maintained and cut dividends over the last five years. Dividends have gone nowhere for HSBC, and it has just begun a huge restructuring.Read the small printLooking at EPS and dividends can give a good overview of a company. Lloyds however, is a bank. The banking industry is heavily regulated and has its nuances.Here is a tip. When looking at a company in a complicated industry, find out what analysts are asking management in earnings calls. You will be able to find transcripts or the audio of these calls on the company website, in the investor section. Do this for several companies in the industry, and you will identify the essential themes. “This Stock Could Be Like Buying Amazon in 1997” HSBC-17.6%24.4%0%0.5905 Enter Your Email Address HSBC1.56%8.4%5.3%0.44 Simply click below to discover how you can take advantage of this. Our 6 ‘Best Buys Now’ Shares I would like to receive emails from you about product information and offers from The Fool and its business partners. Each of these emails will provide a link to unsubscribe from future emails. More information about how The Fool collects, stores, and handles personal data is available in its Privacy Statement. See all posts by James J. McCombielast_img

Leave a Reply

Your email address will not be published. Required fields are marked *