Lloyds Banking Group (LSE:LLOY) has had a year to forget. Lloyds shares are on my avoid list for the foreseeable future right now. Instead, I am looking at other options that could make me a passive income.
Can the Lloyds share price recover?
LLOY’s performance on the FTSE 100 over the past 12 months has been poor. Across the 100 incumbents, the Lloyds share price is close to the bottom based on performance over the past 12 months. LLOY has lost over 30% of its share price value in the past 12 months. Since the first day of trading in January, it has lost over 35%. Shares plummeted to a low of 23p per share back in September.
As I write this, the Lloyds share price is up nearly 9% in February alone. This bounce could be attributed to the Covid-19 vaccine rollout. There is an argument for LLOY to be a great contrarian investment. After all, LLOY still boasts over 30m customers, which means people still trust them with their money. In addition to that, it possesses a fairly decent balance sheet which should see it through current murky waters. If and when an economic recovery does occur, LLOY is in a position to benefit. But given the economic uncertainty we’re facing, I do not see the Lloyds share price as a contrarian investment and will avoid it for now.
Passive income opportunity
I often look for dividend stocks with a healthy yield that can make me a passive income. A stock I really like right now is PRS REIT (LSE:PRSR). A real estate investment trust (REIT) is a company that owns, and in most cases operates, income-producing real estate. PRSR is “the UK’s first quoted real estate investment trust to focus on high-quality, new build family homes for the private rental market”.
Unlike the Lloyds share price, the PRSR share price represents an opportunity to me right now. It is currently at a yearly high of 88p per share. Since a market crash low of 60p per share, it has recovered over 45% of its share price value. PRSR can capitalise on the demand of rental properties currently outweighing supply, which is driving tenant costs higher. Zoopla recently reported rents increased over 2% in the last three months of 2020.
City analysts predict a further annual dividend growth at PRSR meaning it carries a juicy dividend yield of over 5% to the fiscal year ends of June 2021 and 2022. This could be a great addition to my investment portfolio for its passive income.
Risk and reward
I have invested in buy-to-let in the past which has cost me a lot of money up front and additional running costs too. I have learnt from that and now prefer investing in stock such as PRSR. There are risks involved of course. If the economy begins to recover, more people will look to move away from renting and buy their own homes. In addition to that, the return of lower deposit mortgages could have a negative effect too.
Right now, I believe PRSR offers a juicy yield and is a tempting stock to invest in. I would avoid the Lloyds share price and monitor events. Here is another dividend stock I really like to make me a passive income.