Right now, Lloyds‘ (LSE: LLOY) shares seem to have it all. First, investors have had a heap of capital growth. The share price is up 40% over the last year, and 147% over five. And it’s also recovered nicely from Iran war volatility.

Second, the FTSE 100 bank has handed investors a steady stream of dividends. At times, the yield has topped 5%. The board has also been progressive, increasing shareholder payouts by around 15% a year. That helps to protect its real value against inflation.

So does that make it a no-brainer buy? Let’s see.

Is the FTSE 100 bank as good as it looks?

After such a strong run, Lloyds may struggle to maintain its momentum. Like all the banks, it’s benefited from higher interest rates. That allows them to widen net interest margins, which measures the difference between what they pay savers and charge borrowers. It’s a key profitability metric.

Interest rates and therefore margins were expected to shrink this year, but as the oil price climbs and inflation follows, that may not happen.

There’s a downside though. Today’s uncertainty may hit the wider UK economy, and the bank’s business and retail customers. Crucially, it may hit demand for mortgages. This will hurt Lloyds, which is the UK’s biggest residential lender, via Halifax. If businesses fold or people lose their jobs, bad loans could rise.

The shares still look surprisingly good value despite their strong run, with a price-to-earnings ratio of just 10.2. The price-to-earnings (P/E) ratio was creeping up, but a 12% increase in earnings per share from 6.3p in 2024 to 7p in 2025 helped knock it back. Pre-tax profit climbed almost 12% to £6.7bn. That’s allowed it to absorb a hit from the motor finance mis-selling scandal. It can even afford to run a £1.75bn share buyback too.

Why has the headline yield shrunk?

The trailing yield’s no longer as attractive as it was, at just 3.63%. That’s down to the fast-rising share price. The forecast yield for 2026 is more promising at 4.22%. Let’s say an investor wanted to earn £1,500 a year of dividends from this one stock, which works out as £125 a month.

To achieve this, they’d need to invest £35,545 today. The forward yield for 2027 is 5%, which would require just £30,000. That’s a lot to put into a single stock, way above the £20,000 ISA contributions limit. If income’s the main goal, there are more generous dividend payers out there. The highest yield on the FTSE 100 is a meaty 8%, which would allow our investor to hit their income target with just £18,750.

Lloyds’ shares aren’t without risk. They would be swept up in a wider stock market crash, if Iran fears intensify, or either the AI or private credit bubbles burst. A slowing UK economy could squeeze profits and cash flows. The high street giants also face stiff competition from smaller, nimbler challenger banks.

But I still think Lloyds is well worth considering for long-term income and growth, inside a balanced portfolio of other FTSE stocks. And I can see plenty more dividend growth heroes to consider buying today.