Anyone following the Lloyds (LSE: LLOY) share price over the past decade will know the chances of making a million here are slim to none. They’ll know the FTSE 100 bank’s share price has collapsed in this time (by 60% to be exact). The chances of a mighty rebound any time soon are less than remote too, given the poor outlook for the UK economy.
Investors in the last decade could at least take consolation in some mighty FTSE 100-beating dividend yields at Lloyds. But now payouts have been suspended in the wake of the Covid-19 crisis on instruction from the Bank of England. The tough economic picture means Lloyds may also struggle to resurrect its payout policy even when Threadneedle Street green lights the payment of dividends from UK banks.
Leaving Lloyds on the shelf I certainly won’t be buying the Lloyds share price any time soon. Last week, it announced it’s so far set aside an eye-watering £3.8bn worth of impairments because of what it called “a significant deterioration in forward looking economic outlook” following the Covid-19 outbreak.
This might not be the end of the matter either. The twin threats of a prolonged coronavirus hangover and a damaging no-deal Brexit loom on the horizon. Why take a gamble with ‘the Black Horse bank’ when there are so many better UK shares to invest in today? It’s not as if Lloyds’s share price is that cheap either. Right now, it commands a forward price-to-earnings (P/E) ratio north of 30 times.
A better FTSE 100 share to make a million with An environment of low interest rates threatens to crush profits at Lloyds in this new decade. But the same can’t be said for UK shares involved in the production of precious metals. This is why I’d rather load up on shares of FTSE 100 silver miner Fresnillo (LSE: LON:FRES) today. Silver prices have just breached the $25 per ounce marker to hit fresh seven-year highs, pulling Fresnillo’s share price to its highest since May 2018.
Yet the Footsie company still looks quite cheap on paper, and certainly compared with Lloyds. At the current prices, Fresnillo a forward price-to-earnings growth (PEG) ratio of just 0.6. This valuation is far too cheap given the multitude of macroeconomic factors that should drive precious metals prices well into the decade and with it profits at the FTSE 100 digger.
You might think the chances of making a million with Fresnillo are remote. But history shows us that buyers of UK shares can make a fortune by building a well-balanced portfolio of quality stocks. Based on the proven rate of return that average long-term investors can make today, someone investing £200 a month in shares from the age of 25 until they retire at 65 can expect to make a cool £1.1m.
So forget about duds like Lloyds and buy cheap, quality shares like Fresnillo in an ISA following the stock market crash. It’s not the only brilliant blue-chip I’d buy today to try and make a million though…
The post You won’t make a million with the Lloyds share price! But investing in this FTSE 100 share may do it appeared first on The Motley Fool UK.
Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended Fresnillo and Lloyds Banking Group (LON:LLOY). Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
Motley Fool UK 2020