As the Lloyds share price flirts with 50p, do I buy more?

Of all the stocks included in the FTSE 100 index, I probably keep the closest eye on the Lloyds Banking Group (LSE: LLOY) share price. I’m not the only one, as Lloyds shares are among the most widely held and heavily traded in London.

The share price is touching 50p

I don’t personally own Lloyds stock, but my wife bought some for our family portfolio in mid-2022. We bought these shares at a price — including buying commission and stamp duty — of 43.45p a share.

At Monday’s close, Lloyds stood at 49.48p, so we’re sitting on a paper gain of roughly 6p a share so far. That equates to a return of around 13.9% in six months or so. I see that as a perfectly reasonable gain from a ‘boring’ value/dividend/income share.

Then again, the Black Horse bank’s stock has been higher over 12 months, hitting a 52-week peak of 56p exactly a year ago, on 17 January 2022. Then came Russia’s invasion of Ukraine, which crashed global stock markets. Thus, over one year, Lloyds shares have lost around 11.6% of their value, versus a 3.8% gain for the FTSE 100.

What’s more, they’ve declined by 30.8% in the past five years. All these figures exclude cash dividends, which would boost them by a few percentage points a year. Even so, Lloyds has been a long-term lemon for its long-suffering shareholders.

Are Lloyds shares really cheap?

At the current share price of almost 49.5p, the entire Lloyds group is valued at £33.3bn. I don’t see this as a high price to buy the UK’s leading mortgage lender, having 26m customers across a range of well known brands. If I could borrow this sum, I’d gladly buy Lloyds outright today.

And as a fundamental investor, Lloyds shares don’t look expensive to me today, but nor do they look incredibly cheap. The stock trades on a price-to-earnings ratio of 8.2, for an annual earnings yield of 12.2%. The trailing dividend yield of 4.3% a year is covered a healthy 2.8 times by earnings.

To me, this suggests that Lloyds’ dividend yield is rock-solid for 2023, despite dark clouds gathering on the economic horizon. For example, disposable incomes are plunging — hit by soaring inflation, sky-high energy bills and rising interest rates. However, I think household balance sheets are strong enough to keep Lloyds’ loan losses and bad debts within reasonable levels in 2023-24.

Would I buy at below 50p?

Now the big question: would I buy these shares at sub-50p? The answer is yes, but not right now. That’s because we’re in the process of building a new share portfolio. So far, this includes 16 different shares, to which I’d like to add at least another four before considering duplicate purchases.

In summary, while I see Lloyds stock as reasonably priced right now, we already own a chunk, so no rush to buy more just yet!