The November share price mini surge at Lloyds Banking Group (LSE: LLOY) had started to drop off. But then came the appointment of Charlie Nunn as the bank’s new chief executive. And since we heard, the Lloyds share price has started heading upwards again.
To be fair, the price movements have been closely aligned with movements in the FTSE 100 over the period. Lloyds shares, though, have been moving in bigger jumps. But can the appointment of a new boss really make a big difference? Will it mean much for the Lloyds share price?
Firstly, I want to voice my appreciation for outgoing CEO António Horta-Osório. I have no complaints at all over how he has managed my bank for me. It’s my bank, you see, because I own some shares. And I reckon that’s the way we should always think of stocks we own. What those managing my bank are doing is far more important than where the Lloyds share price might be going in the short term.
Time to make changes?
If any changes are needed, the arrival of a new boss can be an effective catalyst. A new chief can make adjustments without taking any blame for past mistakes by the old team. For a company in trouble, it can be a great opportunity for a spring cleaning.
I’m sure there’s nothing cathartic needed at Lloyds, mind. And I don’t think there’s any short-term action that could significantly shift the Lloyds share price. There is one small change I’d like to see under Mr Nunn’s leadership. Coming out of the banking crisis, I think Lloyds was too keen to be seen to be paying growing dividends. It wasn’t alone, of course, as all the banks were trying for the same thing.
Now, the reintroduction of dividends was indeed a key milestone. It was an occasion for many investors to heave a sigh of relief. It the bank is back to paying dividends, it must be healthy again, right? And my dividends have since provided me with some comfort while I watched the Lloyds share price lurch from one crunch to another.
Dividend vs Lloyds share price
But many companies make the mistake of prioritising dividends. Don’t get me wrong, I love dividends. Investing for dividends is my key strategy. But the best way to provide reliable long-term dividends is to prioritise the fundamental strength of the company. Nothing should come in the way of that, certainly not dividends.
When Lloyds reinstates its dividend, I’d like to see a more conservative policy. Sensible yields, not big yields, are what I want. Sure, my income from Lloyds might be lower in the short term. But any cash retained for future strength is still my cash, and it should help support the Lloyds share price.
If that’s the only change the new boss makes, I’ll be happy. And I’m definitely holding my Lloyds shares now.
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Alan Oscroft owns shares of Lloyds Banking Group. The Motley Fool UK has recommended Lloyds Banking Group. 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.
The post Why I think this is good news for the Lloyds share price appeared first on The Motley Fool UK.
