If you bought shares on the AJ Bell platform in the last week, there’s a fair chance you bought Lloyds (LSE: LLOY) shares. The FTSE 100 bank made up 8.58% of all stock purchases in the site, one of the highest Buy ratios I’ve seen on the site.

I’m a little surprised by its resurgence. There hasn’t been any major news lately. In fact, recent events may be working against Lloyds. I feared it might be coming to the end of its strong run

The Lloyds share price is up an impressive 141% over the last five years, with dividends on top. The pace has slowed slightly, but it’s still up 30% in the last year.

The valuation is higher

But it’s more more expensive than it was, with a price-to-earnings ratio of around 15.3. The price-to-book ratio has climbed to roughly 1.3. It’s not exactly overpriced, but it’s no longer a bargain.

As the shares have climbed, the trailing dividend yield has fallen to around 3.3%. That’s not due to any slacking by the board. Lloyds increased its full-year ordinary dividend by 15% in 2025, while on 30 July the board announced a 30% hike to the interim payout, alongside a new £1bn share buyback. The forward yield for 2026 is 3.7%. So why are investors buying?

I’m intrigued to see the impact of today’s rising inflation and interest rates on stock markets. This should reduce the attraction of growth stocks, by shrinking the real value of their future earnings. But it can hit income stocks too. If you can get 5% in the savings account without risking your capital, why take a chance on equities?

I can see the argument, but don’t buy it. Over the longer run, history shows that shares easily outperform bonds. That’s because they don’t just offer income, but share price growth too. Reinvest those dividends and the compounding effect is difficult to beat.

Rising interest rates may help

There’s another reason investors may be turning back to old-school FTSE 100 dividend stocks like Lloyds. Interest rates could rise again.

The Bank Rate is currently 3.75%, but the US Federal Reserve has started hiking, and forecasts suggest the Bank of England could lift interest rates four times next year. That could work in favour of the big banks, including Lloyds, by allowing then to widen net interest margins. It’s a reason why their profits have been flying over the last few years.

On the other hand, it could also drive up bad debts, and hit demand for mortgage and savings products.

Lloyds is still growing nicely. First-half 2026 net income rose 9% to £9.7bn, while statutory profit after tax jumped 23% to £3.1bn.

I don’t think this is quite as good a time to buy Lloyds as three years ago, when I took advantage of its P/E at roughly half today’s level and a 5%+ yield. But with a long-term view, I think it’s still well worth considering for both income and growth. And there’s another UK income stock I like right now.

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Harvey Jones owns shares in Lloyds.