The Lloyds (LSE:LLOY) share price has been on a roll recently. Since the start of 2021, the stock is up nearly 30%. And over the last twelve months, this performance is closer to 50%. But the question is, can the Lloyds share price keep rising from here? And should I be adding the FTSE 100 bank stock to my portfolio? Let’s take a look.

The rising Lloyds share price

There have been some critical developments surrounding Lloyds share price recently. The most prominent of which is the latest actions by the Bank of England. At the start of the pandemic, the Bank of England decided to introduce temporary restrictions that prevented banks from paying dividends to their shareholders. The motivation behind this decision was to ensure sufficient capital was available to keep the UK economy functioning throughout this crisis.

While an unpopular decision, I do think it was a prudent move. These restrictions were lifted slowly over time. However, as of last week, they were completely eliminated. So, Lloyds and other UK banks are free to revive their dividend policies.

Needless to say, this is fantastic news for income investors. And with analyst forecasts indicating a total payout of 2.13p per share, the dividend yield based on the Lloyds share price today is around 4.7%. That’s quite impressive, in my opinion, especially with interest rates being so low at the moment. Therefore, I think it’s likely that the Lloyds share price will continue to rise given this high yield potential.

The risks that lie on the horizon

As alluring as a 4.7% dividend yield is, it’s important to remember that it’s based on analyst forecasts that may not come to pass. Despite the relatively rapid rollout of the Covid-19 vaccine, the rate of infections in the UK is approaching its highest point ever. This is particularly problematic because if the UK needs to re-introduce lockdown restrictions (which were recently lifted), the restrictions from the Bank of England may return.

Suppose that were to happen. In that case, the seemingly cheap Lloyds share price today may turn into a yield trap as the expected dividend never arrives. At least, not in the short term. However, even if these restrictions don’t come back, the increased number of infections could still pose a significant threat.

Like most banks, a large portion of Lloyds income is generated by issuing loans to businesses that then pay interest. But suppose the UK economy growth begins to stumble. In that case, the profits generated by the FTSE 100 bank will undoubtedly be adversely impacted. And this may have already started happening. The UK economy achieved less than expected growth in May earlier this year.

The bottom line

All things considered, I think the main threats to the FTSE 100 bank stock business are ultimately short-term. Therefore, even if the dividend forecasts are not realised, I believe the Lloyds share price can return to pre-pandemic levels over the long term. And so, I would consider adding this business to my portfolio today despite the risks.

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