Here are two numbers that I think help make the case.
Lloyds petrified the market last month when it emerged battered and bruised from the European Banking Authoritys (EBA) capital stress tests. With a CET1 ratio of just 6.2% under adverse conditions, the bank limped past the EBAs minimum requirement of 5.5% and in turn emerged as Britains worst-capitalised bank.
A pass is still a pass, of course, and Lloyds could have been one of the 24 European institutions forced to raise extra capital. But the firm is far from out of the woods, and still has to face the Bank of Englands own assessments scheduled for mid-December.
And most worryingly for Lloyds, the British central banks worst-case scenario assumes a 35% collapse in domestic house prices, far steeper than the benchmark used by the EBA. Given that Lloyds commands almost a quarter of all mortgages signed off in the UK, another successful outcome is certainly no foregone conclusion
The effect of Lloyds extensive restructuring work, combined with the buoyant bounceback of the British economy, has created expectations of dividend resumption sooner rather than later. Indeed, the bank has been engaged with talks with the Prudential Regulatory Authority for some months now over when and to what extent it can resurrect its dividend policy.
A formal announcement is yet to be made concerning future dividends, however, and a poor outcome to next months assessments from Threadneedle Street could put the buffers on any potential payout.
But even if the firm sails through the Bank of Englands capital requirements, City projections for forthcoming payouts hardly get the blood surging. The bank, as one would expect, carries a modest yield of just 1.4% for fiscal 2014 owing to it only being able to at least potentially fork out a final dividend of 1.1p per share.
However, payout yields at the bank remain subdued in 2015 despite the benefit of a full fiscal year indeed, a total payout of 2.9p per share creates a readout of just 3.7%. By comparison, industry peers HSBC, Santander and Standard Chartered carry mammoth yields of 5.4%, 7.3% and 5.7% correspondingly.
Of course a return to any sort of dividend growth represents a huge milestone in Lloyds recovery. But for those seeking to max out their income flows, I believe there are much better banking candidates available.
Bank on a fortune with the Fool
So if you are looking for stocks with perkier dividend prospects, I strongly recommend you check out this brand new and exclusive report that singles out even more FTSE 100 winners to really jump start your investment income.
Our “5 Dividend Winners To Retire On” wealth report highlights a selection of incredible stocks with an excellent record of providing juicy shareholder returns. Among our picks are top retail, pharmaceutical and utilities plays that we are convinced should continue to provide red-hot dividends. Click here to download the report — it’s 100% free and comes with no further obligation.
Royston Wild has no position in any shares mentioned. The Motley Fool UK has recommended shares in HSBC.We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.