HBoS shares for LLOY?

harriko

Hi, I currently haveabout 185 shares in hbos and I was wondering if its a good idea to sell them and buy shares in Lloyds TSBwhich be about 300 shares. Theyre pretty much the same paying almost the same amount of dividends but Lloyds TSB share is half the price of hbos. So I was thinking I could double my dividends just by transferring to lloyd tsb shares. Is it a good idea?

EdInvestor

So I was thinking I could double my dividends just by transferring to lloyd tsb shares.

The yield on HBOS shares is 3.6% and on LloydsTSB is around 6.5%, so this is correct, you could substantially increase your divi income by switching.

Is it a good idea?

If divi income is your main concern, why not? But check on the cost first: dealing charges and stamp duty will reduce the gain, at least in the first year.

cheerfulcat

With the bigger dividend comes greater risk, of course. HBOS has increased its dividend regularly over the last nine years whereas LLOY's dividend has remained static for the last four. More importantly perhaps, dividend cover for HBOS is 2.28, for LLOY it is 1.3.

harriko

cheerfulcat wrote:

With the bigger dividend comes greater risk, of course. HBOS has increased its dividend regularly over the last nine years whereas LLOY's dividend has remained static for the last four. More importantly perhaps, dividend cover for HBOS is 2.28, for LLOY it is 1.3.

yes i realised that too. their dividend payment remain unchanged. but from this i can reinvest the dividends for more shares. I have calculated that if I bought the Lloyd TSB shares I will get about £100 in my first year. I could reinvest this which give me about 90 extra shares giving me a higher dividend payment the year after, and each year it will increase also with the share price. All it want to do is increase the return capital from the hbos shares in the long term.

Come to think about it am I better off sticking it into an savings account..

cheerfulcat

Hi, harriko,

Do you understand about the dividend cover? If not, you're definitely better advised to go with a savings account.

Apart from that, the dividend reinvestment plan is a good one.