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Lloyds’ share price could make it one of the best dividend shares to buy now

first_img 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. Click here to claim your copy now — and we’ll tell you the name of this Top US Share… free of charge! Roland Head | Saturday, 20th February, 2021 | More on: LLOY Our 6 ‘Best Buys Now’ Shares “This Stock Could Be Like Buying Amazon in 1997” See all posts by Roland Head Roland Head has no position in any of the shares mentioned. The Motley Fool UK has recommended Lloyds Banking Group and Schroders (Non-Voting). 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. Image source: Getty Images center_img Enter Your Email Address Simply click below to discover how you can take advantage of this. 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. The Lloyds Banking Group (LSE: LLOY) share price has fallen by 30% over the last year, lagging the FTSE 100 by 20%. Lloyds hasn’t paid out a dividend since September 2019 and is only expected to declare a tiny final dividend for 2020.Despite all of this, Lloyds’ depressed valuation has got me interested. I expect the bank’s profits and dividend to recover strongly in 2021. Broker forecasts for this year suggest the stock could offer a dividend yield of more than 4%, with another big increase expected in 2022.5G 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…Why I like LloydsHigh street banks have had a problem with low interest rates in recent years. Put simply, low rates and strong competition among lenders have led to lower profit margins on mortgages and loans.I don’t think there’s any end in sight to low interest rates. But I do think banks are likely to find other ways to repair their profitability. One possibility is that competition will lessen in the mortgage market, resulting in higher mortgage rates. For Lloyds, which has around 20% of the UK mortgage market, this could make a big difference.Another area of potential growth is wealth management. Lloyds is expanding into this sector through a joint venture with City firm Schroders. Looking after rich people’s assets is generally more profitable than providing standard banking services, so this too could boost profits over time.Growth could be a struggleLloyds’ big share of the UK mortgage market attracts me. I expect it to be a reliable source of income. But the bank’s large size and UK-only focus does present some challenges. I think these are behind Lloyds’ weak share price.In a mature market like the UK, growth opportunities could be limited. As far as I can see, Lloyds needs to steal business from its rivals to get bigger. That won’t necessarily be easy.Another concern is the impact of the coronavirus pandemic. Broker forecasts for 2020 suggest earnings fell by more than 50% last year, compared to 2019. Profits aren’t expected to rise above 2019 levels until 2022.If the bank can deliver on these forecasts, then I think the shares look cheap. But this isn’t guaranteed. As far as I can tell, no-one really knows how quickly the UK economy will recover when government support measures are withdrawn.One risk I can see is that unemployment will rise sharply after the furlough scheme ends. That could see more borrowers fall into arrears with their mortgages. Similarly, I think there’s a risk we’ll see a surge of small business bankruptcies. This could hit Lloyds’ corporate banking profits.Lloyds share price: at the right level?Of course, Lloyds hasn’t overlooked the potential for increased losses. The accounting rules which apply to banks require them to estimate expected future losses and book these against their profits.The bank included a £4.2bn impairment charge in its results for the first nine months of 2020, reflecting expected losses from the pandemic. If that’s as bad as it gets, then Lloyds looks good value to me at a share price of around 40p. I’d be happy to add a few to my dividend portfolio. 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. Lloyds’ share price could make it one of the best dividend shares to buy nowlast_img read more

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