Lloyds Banking Group (LSE: LLOY) shares have gained some misplaced floor in 2024.

However excellent news comes with a catch, doesn’t it? On this case, it’s made it tougher for buyers right now to construct up a large enough pot to generate some passive earnings.

The Lloyds dividend yield has fallen because of the share price rise. Proper now the forecast is at 5.2%. But when the shares hadn’t risen this 12 months, we’d be taking a look at 6%.

Too late, then?

For each £1,000 a 12 months in passive earnings we purpose for, we now want round £19,200 in Lloyds shares. At first of 2024, we’d have wanted £16,000.

And anybody who purchased on the low level in 2020 would have have wanted solely £8,600 to be taking a look at a forecast £1,000 from dividends this 12 months.

Does that imply it’s too late to think about Lloyds as a long-term passive earnings champion? No, not a bit, but it surely does train us a few issues.

Two classes

If we need to preserve shopping for shares for years to return, we must always need costs to fall, and never cheer after they rise. Billionaire investor Warren Buffett was spot on with that one.

And the earlier we begin, the extra probability we’ll have. So when shares are hammered by a inventory market crash, promoting up after costs have slumped isn’t prone to do us a lot good.

Those that went towards the gang and acquired as many shares as they may after they had been dust low cost are those sitting fairly right now.

Dividend outlook

Although the Lloyds dividend yield is decrease right now, 5.2% continues to be fairly respectable. Money ISAs certainly received’t be capable to match that for lengthy, as Financial institution of England rates of interest drop additional.

And forecasts present the Lloyds dividend rising steadily within the coming years, together with earnings development. In the event that they’re proper, the 2026 yield might hit 6.6%.

That’s a 3rd lesson. A dividend that grows over time might be price much more in the long run than a one-off huge yield right now.

So what number of then?

Let’s get to the purpose. What number of Lloyds shares would I have to pocket that magic £1,000 a month? If I say a mean 6% dividend, I’d want £200,000 invested. At right now’s price, that’s almost 360,000 Lloyds shares.

I don’t have anyplace that a lot, but it surely’s not trigger for despair. As a result of I might get there by investing frequently.

A month-to-month funding of £500 might get me to my purpose in 19 years. And that’s simply on a set 6% dividend, with no share price development or dividend raises.

Diviersify or threat all of it

Wouldn’t it be dangerous to take a position the lot in a single single inventory for the subsequent 19 years? Horribly dangerous, sure. We’ve seen how badly monetary shares endure in financial shocks. And something tied to the mortgage market will certainly face extra volatility.

However is it practical to focus on at the least a 6% common annual return from a diversified portfolio of UK shares? I feel so. In truth, my cash’s on it.