The Lloyds (LSE: LLOY) share price has had a rocky couple of years. And it does not look as if the environment will improve for the company anytime soon.
The global geopolitical situation and uncertain economic outlook mean that the environment for financial institutions like Lloyds is becoming incredibly challenging to navigate.
However, after more than a decade of restructuring, the lender is in a much stronger position today to deal with the challenges than in the past.
I think this puts the business in a great position to take advantage of any opportunities that may emerge over the next couple of years. The near-term outlook for the company is uncertain, but the bank could emerge stronger from the current situation, and growth could accelerate when the economic outlook begins to improve.
Lloyds share price outlook
It is impossible to tell how any stock will perform over the next year or so. However, in the long-run, shares should reflect the performance of the underlying business.
This suggests that if Lloyds builds on its progress over the past decade, the bank should be able to increase its overall market value during the next decade.
That is not to say the lender will not encounter any challenges in the years ahead. As I noted above, the economic outlook is incredibly uncertain. UK economic growth could grind to a halt due to the current geopolitical crisis. This would have a significant impact on the company’s expansion plans.
Management is doing everything possible to diversify revenue streams. The group is planning a massive expansion of its build to rent property portfolio. It is also investing significantly in its wealth management business.
Both of these initiatives should help the company move away from its core business and help produce a more predictable and stable revenue stream for the lender and its shareholders. This should help improve investor sentiment towards the Lloyds share price.
Increasing shareholder returns may also attract investors to the company.
Cash returns on the cards
Over the past couple of years, Lloyds has accumulated a vast amount of capital on its balance sheet. It is starting to return some of this money to investors. The group announced a £2bn share buyback at the end of February as rising revenue pushed profits higher.
The corporation also recommended a final dividend of 1.33p, taking the annual payout to 2p compared with 0.57p a share for 2020. City analysts expect the company to push forward with more cash returns over the next couple of years. The group could even recapture its previous title of being one of the most generous dividend stocks in the FTSE 100.
Before the financial crisis, the Lloyds share price supported a dividend yield of around 8%.
Considering all of the above, I think the outlook for the stock is exciting. While it is impossible to predict what is next for the Lloyds share price in the near term, I think over the next 10 years, the company could produce attractive returns for investors. That is why I would buy the stock.
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Rupert Hargreaves has no position in any of the shares mentioned. The Motley Fool UK has recommended Lloyds Banking Group. 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.