I bought 4,403 Lloyds shares in June and 4,856 in September. Here’s what they’re worth now

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When I bought Lloyds (LSE: LLOY) shares on 2 June last year, I thought they were a no-brainer buy at just 45.05p. So I invested £2,000 and got 4,403.

When the Lloyds share price subsequently dipped to 40.89p I was surprised but not too dismayed, and took the opportunity to average down by investing another £2,000.

This time I got 4,856 shares, which means I picked up an extra 453 shares for exactly the same sum. I love buying stocks after the share price has fallen, and that’s why. But this assumes the share price will recover over time. With Lloyds, such assumptions are dangerous.

A top income stock

Lloyds shares haven’t gone anywhere much for years. They’re down 12.14% over 12 months, and 27.6% over five years. A string of executives have made huge strides in cleaning up the bank following the financial crisis, but its share price rarely acknowledges their efforts. Until last week.

Despite averaging down, and pocketing my first dividend on 18 September, worth a blockbuster £40.34 (which bought me another 94 shares), I was in the red on my purchase until last Thursday’s upbeat market response to the bank’s full-year results.

I was beginning to think that if Lloyds posted a £1trn profit, quadrupled its dividend and bought back half its shares, it might still fall in price. In practice, a 57% jump in full-year profits, a 15% hike to the dividend, a £2bn share buyback and pre-tax profits of £7.5bn had the opposite effect. After announcing that little lot, Lloyds shares climbed 6.16%. About time.

Markets were happy to ignore a 4% dip in Q4 profits amid tighter mortgage pricing and the £450m Lloyds has set aside for the regulatory probe into UK motor financing. Today, I’m in the black. My £4k is now worth £4,255, a rise of 6.37%.

Is this another PPI scandal?

That’s small beer, of course. I haven’t thrown a huge heap of wealth at Lloyd shares. I’ve been testing the waters, biding my time.

I suspect Lloyd shares will take a breather after all that excitement, at least until markets are convinced that central bankers are set to start cutting interest rates. Such a move should lift the economy, revive the housing market, and reduce the chance of bad debts.

Yes it won’t be one way traffic after that. Falling interest rates will squeeze net interest margins, the difference between what Lloyds pays savers and charges borrowers. The car finance mis-selling scandal will no doubt rattle on. If it blows up into another PPI mis-selling scandal, which cost Lloyds £20bn, that £450m provision won’t even begin to cover the cost. I don’t think it will but one never knows.

I’m not selling my Lloyds shares. They’re forecast to yield 6.68% in 2024 and 7.33% in 2025. I’ve only received one tiny dividend payment so far, and I’m hoping for much more income over time. Yet I won’t be topping up my existing holdings, even with the stock nicely valued at 7.27 times forward earnings. There are plenty more top dividend stocks on the FTSE 100, and I want to spread my risk around.

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Harvey Jones has positions in Lloyds Banking Group Plc. The Motley Fool UK has recommended Lloyds Banking Group Plc. 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.