LONDON Lloyds (LLOY.L) is due to set out its dividend plans next week, including how and when it might return surplus capital to shareholders, making the stock more attractive ahead of a planned sale of some of the government’s shares to retail investors, industry sources said.
British finance minister George Osborne said in June he would offer some of the government’s remaining 15 percent stake in the bank to retail investors in the next 12 months, in a sale reminiscent of 1980s privatizations of British Gas and British Telecom under then Prime Minister Margaret Thatcher.
A key part of the stock’s attraction to private investors is its potential dividend yield. The bank was one of the highest dividend-paying stocks in the FTSE 100 .FTSE before it was bailed out during the 2007-09 financial crisis at a cost of 20.5 billion pounds ($32 billion) to British taxpayers.
The state-backed lender has said it intends to hand shareholders at least half its sustainable earnings in the medium term, bringing it into line with British rivals HSBC (HSBA.L) and Barclays (BARC.L).
The bank is expected to say how it plans to meet that target alongside its first-half results on July 31 and detail plans to return any surplus capital to shareholders, either through one-off dividends or share buybacks, the sources said.
Lloyds restarted dividends with a modest payment of 0.75 pence per share for 2014 and investors have been awaiting further guidance on dividend growth.
“We think it could ramp up from that three quarters of a penny dividend quite rapidly, up to 3 or 4 pence and possibly more, over the next two to three years,” said Richard Buxton, head of UK equities at Old Mutual Global Investors.
(Additional reporting by Sinead Cruise– Editing by David Holmes)
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