The Lloyds Banking Group (LSE: LLOY) share price has finally gained a bit of ground in 2024, up 28% year-to-date.

Its super high forecast dividend yield has softened to 4.8% now. That could still mean a nice income if Lloyds can maintain it though.

The price-to-earnings (P/E) ratio still looks low too at 9.8, which is well below the FTSE 100 average. And forecasts for the next few years look strong.

Why so cheap?

First, I want to think about why Lloyds shares appear to be on such a low valuation.

I see one short-term reason. And that’s an 18% fall in earnings per share (EPS) on the cards for this year. At least, that’s what the forecasts say.

I think that’s probably close to accurate too. The first half saw a 17% fall in statutory profit after tax. And EPS dipped 13% compared to the first half of 2023.

And then in the slightly longer term, we don’t yet know how big a hit the Bank of England’s interest rate cuts will make on Lloyds’ lending margins. But they’ll surely have some effect.

Uncertainty

This kind of uncertainty, especially with the likelihood of a drop in earnings this year, really can keep a share price low. Investors, especially the big City institutions, want a decent safety margin in the prices they’re prepared to pay for the shares.

But that, in my view, opens the door for private investors like us to aim for better returns. If we’re in it for the long term, we shouldn’t care about how our portfolios look in the next few months, or the next year.

And looking ahead, I think forecasts are favourable for long-term investors.

Even if earnings fall as expected this year, the brokers expect them to turn upwards again in 2025. And they don’t predict any pause in dividend rises.

In fact, they show the dividend yield back up to a very nice 6.2% by 2026. And it would still be more than twice covered by forecast earnings.

Price targets

I’m always wary about broker share price targets. But, as part of my wider research and with a fair bit of caution, I do think they can help me make up my mind about a stock. After all, listening to a range of opinions has definitely made me a better investor.

Right now though, I see an average price target of just 64p. That’s only a bit above the 61p at the time of writing.

What’s more, the various targets range from 53p to 78p, according to the consensus at MarketScreener.

But that’s with a near-term outlook. And there does seem to be a Buy consensus on Lloyds right now.

Be prepared

Still, the wide range does seem to reflect the uncertainty. And I’d say that means I’d have to be prepared for possible volatility in the short-to-medium term if I buy any more now.

But that’s fine with me, as I’m in it for long-term dividends. And while I don’t want to sell, why should a bit of share price wobble matter?