I like this stock. I’ve been in and out of it a few times over the last 10 years. I made a profit each time.
The Teaser
Pop quiz: Name a company that’s been around for 300 years, has 68,000 employees, is valued at $60 billion in the market, has a dividend yield of 4.7%, has a P/E of 13, an earnings growth rate of 20%, is being ignored by institutional investors, and can be purchased at the low, low price of $3.38 per share. Does such a company really exist? It certainly does.
The Big Reveal
Lloyds Banking Group [LYG] provides banking and financial services under the Lloyds Bank, Halifax, Bank of Scotland, and Scottish Widows brands in the United Kingdom and internationally. The company operates through three segments: Retail, Commercial Banking, and Insurance and Wealth.
The Retail segment offers a range of financial service products, including current accounts, savings accounts, mortgages, motor finance, and unsecured consumer lending products to personal and small business customers.
The Commercial Banking segment provides lending, transactional banking, working capital management, risk management, term lending, and debt capital markets services for small and medium sized enterprises, corporates, mid-markets, and financial institutions.
The Insurance and Wealth segment offers insurance products, such as life, home, motor, and protection insurance; investments comprising pensions and investment products; and wealth management products and services.
It also provides credit cards, and personal and business loans; and online and telephone banking services.
Lloyds Banking Group was founded in 1695 and is headquartered in London, the United Kingdom.
Why I Like LYG Now
First, I’m a value guy rather than a growth or momentum guy, so this stock is in my wheelhouse. Second, after being ignored by institutions and the analyst community for years, I noticed that a few of them are starting to warm up to the stock. And third, the dividend yield is 4.7%, so I’m getting paid to wait for the stock price to move up.
But hold on… doesn’t this stock violate my minimum price rule of $5 per share? Yes, it does. The mitigating factor at play here is that the odds of this company going to zero are close to zero. Yes, it could happen. But it’s far less likely to happen to LYG than it would be for most sub-$5 stocks.
As always, do your own due diligence before making any trading decision. This article is not to be taken as personal financial advice. I like LYG and I think it deserves a closer look.