In a move long awaited by many investors including equity income managers, the board is recommending dividend payouts of £535m for last year. It said the decision would benefit three million shareholders directly and many others through their pension funds. The largest share, £130m, will go to the government.
Lloyds is in this position as it has demonstrated to regulators its profitability and capital position have improved significantly.
The group’s underlying profit increased by 26% to £7.8bn in 2014, up from £6.2bn in 2013. This was ahead of market expectations for a profit of £7.5bn pounds. Statutory profit after tax was £1.5bn, compared to a loss of £0.8bn in 2013.
Lloyds also made a £2.2bn provision for PPI in 2014, down from £3.1bn in 2013, and a £0.9bn provision for other regulatory items.
Meanwhile, the bank said it would pay out discretionary annual bonuses worth £369.5m for 2014.
Its chief executive, Antonio Horta-Osorio, is set to receive a total remuneration package of £11m, consisting of basic pay of £1m, an £800,000 bonus and a deferred bonus award of 535,083 shares.
Commenting on the results, Horta-Osório said: “Over the last four years we have transformed Lloyds Banking Group into a low cost, low risk, UK focused retail and commercial bank. This has been made possible by the hard work of everyone at the Group.
“Today’s results also demonstrate that our profitability and capital position have improved significantly, and this has enabled the board, for the first time in over six years, to recommend we pay a dividend to our shareholders.
“While we recognise we have more to do, we enter the next phase of our strategy from a position of strength. We will remain focused on our customers, embrace the digital age throughout the whole group, continue our support for the UK economy and aim to deliver strong and sustainable returns for our shareholders.”
The government announced earlier this month it had sold a further £500m of Lloyds Banking Group shares through a trading plan launched in December, taking the total amount of money recovered for the taxpayer from the bank to just under £8bn.
The Chancellor said the latest sale means the government’s stake in the bank has reduced to 24%. It follows £7.4bn of sales completed last year, prior to which the government’s stake was 40%.
George Osborne added all shares sold through the trading plan had been sold above the average price the previous government paid for them, which was 73.6p.
The trading plan involves gradually selling shares in the market in a ‘measured’ way. Launched on 17 December 2014, it will continue for about four months and will end no later than 30 June.
Lloyds, RBS, and HBOS were rescued from the brink of collapse by a 2008-2009 government bailout package worth £37bn.
