Lloyds Banking Group (LSE: LLOY) is among the most popular and widely held UK stocks for both individual and institutional investors. Good news: the Lloyds share price has soared from its 2020/21 lows to highs not seen since the global financial crisis of 2007-09.
Lloyds leaps
During the Covid-19 crisis, shares in the Black Horse bank plumbed new depths. On 22 September 2020, they collapsed as low as 23.59p. These were levels not seen since autumn 2008, when several British banks were close to collapse.
As I write, this FTSE 100 stock trades at 96.16p, valuing this storied financial firm at £56.1bn. This leaves the Lloyds share price up 26.8% over one year and 98.4% over five years (excluding cash dividends). These are terrific gains for value investors — including me and my family.
That said, the shares have been even higher this year, peaking at 114.6p on 4 February. Alas, after the US attacked Iran on 28 February, the shares plunged to their 2026 low of 87.62p on 23 March, before rebounding.
Despite increased volatility this year, here are three ways for me to keep making money from Lloyds shares:
1. Capital gains
My family portfolio owns a chunk of Lloyds, having paid 43.5p a share in mid-2022 for our holding. We haven’t yet sold a single share, so we are sitting on a paper profit of 121.1%. Thus, we have more than doubled our money by owning one of Britain’s biggest banks.
If we ever do decide to sell this stake, then this will likely produce hefty capital gains. Happily, these profits will not be subject to tax, as our holdings are safely held inside tax-free wrappers. Yay.
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2. Delicious dividends
When we became part-owners of Lloyds four years ago, we’d bought this stock for its market-beating dividend yield. As the share price shoots up, it brings down this cash yield. However, the yearly dividend has jumped from 2p for 2021 to 3.65p for 2025 (up 82.5%).
Today, Lloyds shares offer a decent dividend yield of 3.8% a year — comfortably ahead of the Footsie‘s yearly cash yield of 3.1%. As a lazy, long-term shareholder, I love pocketing this ‘free’ cash.
3. Bonus shares
My wife and I both work, so we don’t spend our share dividends. Instead, we reinvest them through DRIPs (dividend re-investment plans) into buying yet more shares. This increases the size and value of our shareholdings, delivering a ‘turbo boost’ to our future gains.
In short, investing in Lloyds shares four years ago has produced outsized and valuable returns for my family.
However, we live in troubled times. The US-Iran war is dragging on, which could lift energy prices above their already-elevated levels. With inflation (the cost of living) surging, global interest rates look set to rise instead of falling. This could shake the already weak UK housing market, where Lloyds is the #1 mortgage lender.
In summary, if the British economy weakens, then this could hammer Lloyds’ revenues, earnings, and cash flow. But given the size and strength of its balance sheet, I’d expect the bank to bounce back. Accordingly, I won’t be panicked into selling by short-term wobbles!
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Cliff D’Arcy has an economic interest in Lloyds Banking Group shares.
