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Lloyds offers chug-along income

A 5 to 6 per cent yield is not without its attractions, although a growth plan is preferable
Lloyds offers chug-along income

Long-suffering Lloyds (LLOY) shareholders will have felt an uneasy sense of déjà vu last year, when the UK’s largest high-street bank was forced, at the behest of its regulator, to can its dividend. Less than 12 years earlier those who had flocked to the lender’s market-leading yield saw the income stream evaporate amid a spiralling global banking crisis

On both occasions, many concluded there was little point holding the shares without sight of the next distribution. Such are the investor waters that listed banks must negotiate.

It’s worth noting the history here. Until 2008, banking was perhaps the biggest game in UK plc. Rising interest rates and credit expansion led to massive capital generation, making Lloyds and its peers a perfect fit for income-seekers. A legacy of mergers had also built up a wide pool of shareholders, including former employees, who relied on the dividend’s annuity-like properties.

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