Lloyds’ (LSE: LLOY) shares have been bombing it this year and frankly, I couldn’t be happier. The FTSE 100 stock makes up a big chunk of my portfolio, and it’s getting bigger.

This year’s strong start also helped me get over the fact that last year Lloyds trailed rivals Barclays and NatWest by some distance. Now it’s making up lost ground. The Lloyd share price is up 31% year-to-date. By contrast, Barclays is up a relatively modest 13.5%, while NatWest’s up 21%.

An investor who went big on Lloyds at the start of the year, investing £20k, would have a handsome £26,200 today after charges. They can also look forward to their first dividend on 20 May. So can I.

Can this stock continue to smash the FTSE 100?

Last year, Lloyds was knocked back by relatively high exposure to the motor finance mis-selling scandal. The board has now set aside a total of £1.15bn to cover potential compensation. Some estimates suggest it may need £3bn.

However, Lloyds’ proactive approach in addressing the matter has helped mitigate fears, allowing the board to shift its focus back to core operations.

Announcing a £1.7bn share buyback along alongside 2024 results on 20 February was a canny move. That put the potential compensation bill into perspective. It underlined Lloyds’ robust capital position and cheered up investors.

The results weren’t exactly stellar though. Pre-tax profits plunged more than 20% from £7.5bn to £5.97bn. Analysts had expected £6.39bn. That didn’t stop the buyback, and it didn’t stop the board from increasing the total 2024 dividend by almost 15% from 2.76p to 3.17p per share. Nice.

The board’s keen to keep investors happy and I’m down with that. The Lloyds share price may have trailed competitors, but it’s still up 53% over 12 months, with a trailing yield of 4.35% driving my total return even higher. That’s forecast to hit 4.73% in 2025 and 5.26% in 2026.

It’s not without risk though. Lest we forget, Lloyds shares went sideways for years. Also, its focus on the UK domestic retail and small business banking sectors means its fortunes are tightly pegged to our struggling economy.

I’ll reinvest dividends while I wait for growth

Inflation isn’t licked yet either. This is forcing the Bank of England to keep interest rates relatively high, squeezing mortgage lending and the housing market.

Interest rate cuts may revive the housing market, but could rebound on Lloyds. Its 2024 net interest margins contracted by 16 basis points to 2.95%. Falling rates could squeeze them further.

The 17 analysts offering one-year share price forecasts have produced a median target of 72.58p. That’s only a fraction above today’s 72.38p. I suspect those figures were produced before the recent Lloyds share price bump. They may also indicate that we’ve had our fun for now.

Much depends on whether the board can deliver on strategic initiatives aimed at generating more than £1.5bn in additional income by 2026.

I think Lloyds is well worth considering for investors today. The price-to-earnings ratio still looks undemanding at 11.5. If share price growth does slow, at least I’ve got those dividends.