Lloyds Banking Group (LSE:LLOY) has been rising the dividend per share fee for the previous few years, after chopping it utterly in the course of the pandemic. With the dividend yield at the moment at 4.54%, it’s already larger than the FTSE 100 common of three.44%. But based mostly on the dividend forecasts, there could possibly be extra earnings on the way in which.

Particulars of the funds

Sometimes, Lloyds pays two dividends a yr. The primary is asserted as a part of the annual leads to February. The second is introduced in July with the half-year earnings. Final yr, the 2 funds amounted to 2.9p per share. Utilizing a share price of 63.9p, this offers a yield of 4.54%.

The expectation is for a dividend of 2p subsequent month, with 1.1p in July, totalling 3.1p for this yr. For 2026, it’s forecast to be 3.2p, rising to three.5p in 2027.

Provided that the subsequent dividend hasn’t even been declared but, if an investor purchased £2k value of Lloyds shares now, they might be entitled to obtain all of the earnings this yr. If I assume the share price by the tip of 2027 is 63.9p, then the £2k might make an investor £322.51 in dividends over this era.

This assumes the dividends acquired are reinvested when paid, which helps to compound future returns.

Factors to recollect

The large issue to flag right here is that dividends aren’t assured. The projections are based mostly on forecasts, according to how the financial institution’s anticipated to carry out financially. But there are components that would negatively influence this. For instance, if UK rates of interest are lower sooner than anticipated over the subsequent yr, it might cut back revenue for the financial institution. A UK recession might trigger prospects to chop again on card spending, or improve mortgage defaults.

Additional, the share price won’t be the identical in 2027. This might work both for or towards an investor. If the inventory falls in price, the unrealised loss would offset a few of the dividends acquired. Nevertheless, if the inventory will increase, then the capital appreciation would make it an much more worthwhile funding. In the end, future share price swings can’t be predicted.

Over the previous yr, Lloyds shares have elevated by 54%. That is partly because of the monetary advantages of rates of interest remaining larger for longer. But even with this bounce, the price-to-earnings ratio’s 8.41, under the honest worth benchmark of 10 I take advantage of when looking for low cost shares.

Balancing the uncertainty

Planning for earnings funds offers traders a good suggestion of whether or not the reward for the danger of shopping for’s value it. After all, future dividends aren’t assured, however I really feel traders ought to think about including Lloyds to an present portfolio.