Lloyds is expected to set out its dividend plans next week, including a potential return of surplus cash to shareholders, making its stock more attractive ahead of a possible sale to retail investors, industry sources said.
Chancellor George Osborne said in June he would sell part of the government’s remaining 15 per cent stake in Lloyds to retail investors in the next 12 months, in a sale reminiscent of the 1980s privatisations of British Gas and British Telecom.
Lloyds’ potential dividend yield and prospects for special one-off payouts would be a big part of the stock’s appeal to retail investors, many of whom look for shares to provide income.
Prior to a £20.5bn bailout in the 2007-2009 financial crisis, Lloyds was one of the biggest dividend-payers in the FTSE 100. In 2005 and 2006, for instance, it handed more than half its profit to shareholders.
The state-backed bank has already said it intends to give shareholders at least half its earnings in medium term, bringing it into line with rivals HSBC and Barclays.
Lloyds is expected to say how it plans to meet that target when it reports first-half results on July 31 and also set out how it would return any surplus capital to shareholders, either through one-off dividends or share buybacks.
Lloyds paid its first dividend for six-and-a-half years with a payment of 0.75p per share for its 2014 financial year.