The Lloyds dividend yield on cost has more than tripled for investors who bought shares in August 2021, when the stock traded at 45p. The same shares now change hands at around 115p, and the group has increased its ordinary dividend per share by more than 130% since the first half of 2021.
The arithmetic is straightforward. At 45p per share, today’s forecast dividend of 4.6p per share produces a yield on cost of roughly 10.2%. That compares with a forward yield of around 3.2% for a buyer entering the market today at the current price.
How Five Years of Payout Growth Built the Return
Lloyds Banking Group (LLOY) delivered £17 billion of total shareholder distributions since 2021, according to the group’s investor relations disclosures. That total covers both ordinary dividends and share buybacks as earnings recovered across the period.
For the full year 2025, the Lloyds Banking Group 2025 Annual Report shows a total ordinary dividend of 3.65p per share: a final dividend of 2.11p per share paid in May 2025, and an interim dividend of 1.22p per share paid in September 2025. The board also announced a share buyback of up to £1.75 billion. Together, those elements represent total capital distributions of £3.9 billion in respect of 2025.
The 2025 full year produced statutory profit after tax of £4.76 billion, up 6% year-on-year, with a return on tangible equity of 12.9%. Tangible net assets per share rose to 57.0p at 31 December 2025, from 52.4p at 31 December 2024.
The payout trajectory has continued into 2026. The group announced an interim dividend for the first half of 2026 of 1.58p per ordinary share, a 30% increase on the 1.22p interim paid in the first half of 2025, totalling £918 million. The ex-dividend date is 6 August 2026, with payment due on 15 September 2026.
What the Lloyds Dividend Yield Means for Buyers Today
The five-year track record is clearly attractive. The question for a buyer entering now is whether the valuation and income trajectory justify the current price.
Consensus data from Investors Chronicle, as of 1 September 2026, shows 4 Buy, 9 Outperform, 5 Hold, and 2 Sell recommendations on LLOY. The median analyst price target stands at 125p, implying 13.7% upside from the current level, with a high target of 140p and a low of 93p.
The forward price-to-earnings ratio of 11 sits below the FTSE 100 average, which some analysts take as evidence the stock remains modestly priced relative to earnings power. Higher interest rates support net interest margins, though the same rates, if they rise too sharply, can increase loan defaults across the retail and commercial books Lloyds carries.
The motor finance provision overhang is a live risk. A charge taken in the third quarter of 2025 depressed reported return on tangible equity; the group’s own 2025 Annual Report notes the 12.9% return would have been 14.8% excluding that item.
The Contrast: Diageo Over the Same Window
Stocks that disappoint over five years show how sharply the yield-on-cost story can run in reverse. Diageo (LSE: DGE) has fallen 53.3% over three years, according to Yahoo Finance, illustrating that a starting yield of 3% to 4% provides little cushion when capital erodes at that pace.
Selecting well is the central challenge. Lloyds in 2021 benefited from recovering bank earnings, rising rates, and a management team willing to ratchet up returns to shareholders. Not every income stock offers those conditions at the point of purchase.
For existing holders of Lloyds, the Lloyds dividend yield on cost is now a materially different figure from the headline yield quoted for new buyers. The 1.58p interim for 2026, up 30% on the prior year, suggests the board still sees room to grow the payout. Whether that growth rate holds will depend on credit quality, the motor finance outcome, and the broader interest-rate environment into 2027. CMC Markets projects the dividend continuing to edge higher over 2026 and 2027, with the group targeting a common equity tier 1 ratio of around 13% by end-2026.
