Lloyds is tipped for a big return
BRITAIN’S biggest mortgage lender Lloyds featured strongly on the FTSE 100 leaderboard after a respected fund manager predicted it would be a ‘dividend giant’ by 2017.
Alex Wright, who manages Fidelity Special Situations and Fidelity Special Values funds – both previously run by the legendary stockpicker Anthony Bolton – has burnished Lloyds’ credentials for prospective investors.
Lloyds (up 0.89p to 73.84p) only resumed paying dividends in February, more than six years after it was rescued by taxpayers.
This was a big moment. Lloyds is the most widely held stock by UK investors, with around 2.7m private shareholders.
Although it paid a token divi of just 0.75p per share for 2014, bosses have pledged to make Lloyds a top-paying stock in future.
And Wright has every faith the management team, led by chief executive Antonio Horta-Osorio, will deliver
He reckons the yield, the key measure of return for shareholders, will be 4.5pc next year, based on the current share price.
He predicts it will rise to 7pc in 2017, making it one of the most generous stocks in the FTSE 100. Analysts predict only eight of the UK’s biggest blue- chip stocks will be paying more, with BP (down 6.55p at 322.9p) topping the table at 8.16pc.
Of the big banks, only HSBC, at 7.22pc, is expected to offer a more generous dividend.
This will be music to the ears of Lloyds’ army of long- suffering shareholders and make the stock far more attractive for those looking for a new home for their money.
Laith Khalaf, from investment firm Hargreaves Lansdown, says: ‘The resumption of a healthy dividend is of paramount importance to Lloyds shareholders who endured for six years without any yield.
‘Prior to the financial crisis, Lloyds was the jewel in the crown for income investors, and if things go to plan in the next year or so, it will be once again.’
As Britain’s biggest mortgage lender, with more than a fifth of the market, Lloyds was also buoyed by latest figures from the British Bankers’ Association.
These showed net mortgage lending in August was at its highest level in five years, while banks approved the most mortgages since February 2014.
Fears that stricter affordability rules introduced in April last year would stifle mortgage lending appear to have been overblown. But the encouraging figures did not prevent RBS from slipping 2.6p to 310.7p, with Barclays down 1.75p to 246.45p and HSBC dropping 10.65p to 488.1p
Investors continued to choke on the extraordinary VW diesel emissions cheating scandal in the US, which now threatens to engulf Europe.
Frankfurt-listed BMW dropped 5.15pc, or 4.11cents to 75.68cents, after a report in German magazine Auto Bild claimed some of its diesel cars were found to exceed emissions standards.
BMW said there had been no manipulation at the group and it was unaware of tests cited by Auto Bild.
Shares in VW nudged up slightly as investors were reassured that the resignation of chief executive Martin Winterkorn would help the company move on.
But the share price is still down by around 30pc since the revelations emerged at the weekend.
The pollution scandal, which JP Morgan has estimated could cost VW £26bn, continued to cause problems closer to home.
Growing concerns that car manufacturers throughout Europe were also cheating emission tests have spooked London-listed motor traders. The UK’s largest car dealership Pendragon slumped 7.3pc or 3.25p to 41.25p, while rival firm Lookers fell 4.2p to 177.1p.
But having lost 7.6pc on Tuesday and 2.5pc on Wednesday, catalytic converter maker Johnson Matthey edged up 0.8pc (20p) to 2398p yesterday. The firm has been under pressure as diesel catalytic converters make up half of its sales.
Struggling commodities giant Glencore took another pounding after Goldman Sachs cut its price target for large miners amid the continued decline in commodity prices and falling demand from key emerging markets.
Analysts at the Wall Street investment bank are now targeting a price of 130p for Glencore, down from 170p.
Shares dived 9.6pc, or 10.49p to under a pound, or 98.61p to be precise.
Anglo American also dropped more than 5pc, or 33.5p to 624.6p, after Goldman confirmed its ‘sell’ rating for the company.
But gold miner Randgold Resources, up 5.5pc, or 206p, to 3946p, and Fresnillo, up 20.5p to 621p, were the top blue-chip risers, recovering some of the losses incurred earlier in the week.
The FTSE 100 closed down 70.75 points at 5961.49.