Lloyds Share Price: How Safe is the 4.8% Dividend Yield?

Summary:
• Lloyds share price has staged a strong recovery in the past few days. We explain what to expect and whether the LLOY dividend is safe.

Lloyds share price has staged a strong recovery in the past few days. It has rallied in the past two days straight and is now sitting at its highest level since September 26. The stock has jumped by about 18% from its lowest level in October. It remains about 18% below the highest level this year.

Is the 4.8% dividend yield safe?

Lloyds stock price has staged a strong recovery even after the worrying autumn statement by Jeremy Hunt. In his statement, he warned that the UK economy was in a recession caused by the soaring energy prices. He also said that this recession will continue for a while, with the unemployment rate set to keep rising.

Lloyds Bank is highly exposed to the UK economy, where it serves more than 26 million customers. As such, the company will likely continue struggling in the coming months. Most importantly, the company will likely be exposed to the falling house prices in the UK. 

Data published last week showed that UK house demand plunged at the fastest pace since 2020. Additional data by the Office for Budget Responsibility (OBR) will fall for the next two years and then start rising again. Mortgage rates are expected to remain at an elevated level for a while.

Therefore, analysts expect that Lloyds Bank will experience slow growth in the coming months. Indeed, this slowdown was seen in the past company’s financial statemen. Its profit crashed by 26% to 1.5 billion pounds as the company increased its debt provisions to 668 million pounds.

A positive fact for Lloyds and its dividend is that it is relatively undervalued with a price-to-book ratio of 0.6 and a core tier one ratio of 15.6. The latter is the second-best in Europe after Unicredit, which has a ratio of 15.7. Therefore, there is a likelihood that Lloyds will maintain its dividend although growth is expected to be limited.

According to FT, Lloyds Bank is taking more measures to grow its business by targeting affluent customers.

Lloyds share price forecast

The four-hour chart shows that the LLOY stock price has made a strong recovery. As it rose, it moved above the important resistance level at 43.68, which was the upper side of the ascending triangle pattern. It also moved above the Ichimoku Cloud while the Relative Strength Index (RSI) has been in a strong upward trend.

Therefore, there is a likelihood that the stock will keep rising as buyers target the key resistance level at 46.98p, the highest point on October 5. A drop below the support at 44p will invalidate the bullish view.