Lloyds Bank has more great news for income investors

by Lee Wild from interactive investor |

It already pays a big dividend, but there's even more to like about Lloyds after today's announcement.

Around this time next year, Lloyds Banking Group's (LSE:LLOY) vast army of loyal shareholders will receive their first quarterly dividend. The news, announced today, will be well-received by the bank's investors who will value a more regular income stream.

Rather than just the evenly spaced half-year and final payouts, shareholders will receive equal dividend payments for the first three quarters of the year. If business is good, the final dividend for the fourth and final quarter will be larger.

"The group has 2.4 million shareholders, the vast majority of whom are retail investors, and this approach will provide a more regular flow of dividend income to all shareholders whilst accelerating the receipt of payments," says Lloyds whose shares currently yield around 5.3%.

The policy of quarterly payments will be especially welcome among those investors either nearing or at retirement and who want to take the dividend as income rather than reinvest it. 

Lloyds, which pays a final dividend worth £1.5 billion, or 2.14p per share next week, on 21 May, said the move to the payment of quarterly dividends will begin in 2020, with a payment for the first quarter to 31 March being made in June next year.

The ex-dividend and payment dates will be published on the bank's website "in due course", but we do know that shareholders will receive their quarterly dividend income in June, September and December. These three payouts will be 20% of the previous year's total ordinary dividend per share, which was 3.21p. 

A final dividend will be confirmed at the annual results, typically in February, and paid in May, following approval at the AGM. Last year, Lloyds paid out £2.3 billion in dividends and said it intended to buy back its own shares to a value of £1.75 billion. 

And there could be special dividends too. We know Lloyds is generating plenty of cash and big profits, and it's repeated a promise to return any surplus cash to shareholders. That could either be via share buybacks or special dividends.

The recent announcement from regulators on the systemic risk buffer requirement for UK's ring-fenced banks should give Lloyds more room to move in terms of future shareholder returns. Some analysts think this could increase the capacity for share buy-backs by £1 billion in 2019.

Source: TradingView Past performance is not a guide to future performance

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