Ready to back Lloyds? The case for CoCos vs shares

LLOYDS

As talks intensify over the planned partial sale of the government's stake in Lloyds Banking Group, investors have revisited the best ways to access the recovery story, with some preferring to buy contingent convertible bonds (CoCos) instead of equities.

Chancellor George Osborne announced plans to start selling down the Treasury’s 39% stake in Lloyds in May and the government may sell 5%-10% of the bank to money managers as early as September, according to the latest reports. Investors are increasingly identifying Lloyds as their favourite banking stock in the UK, but it has not paid a cash dividend to shareholders since 2008, posing a problem for equity investors looking for dividend yield. Its CoCos, on the other hand, offer a current gross redemption yield of 8.3%, making them an attractive alternative to the equity holding. Ll...