In the meanwhile, Barclays (LSE: BARC) sells for round £4.70 per share. So, somebody with a spare £1,000 to take a position ought to have the ability to decide up roughly 212 shares.
(In actuality, it is perhaps a bit lower than that after dealing charges, commissions, and stamp responsibility eat into the £1,000. That’s the reason it is sensible to decide on rigorously when deciding on a share-dealing account or Shares and Shares ISA).
Nonetheless, sticking with 212 shares as an illustration, what may that imply for an investor when it comes to what they might get for his or her cash?
Picture supply: Getty Photographs
Low single digit dividend progress
In the meanwhile, the Barclays dividend is 8.6p per share. So, 212 shares should earn round £18.23 a 12 months in dividends.
That may be a yield of round 1.8%. I don’t discover that notably thrilling.
Not solely is the FTSE 100 common markedly increased at 3.1%, however different UK-listed banks additionally supply greater yields: Lloyds at 3.5% and Natwest at 5.3%, for instance.
Barclays has been rising its dividend per share over the previous couple of years. The latest full-year payout was about 2% greater than the prior 12 months, for instance.
If it maintains that modest annual progress, over the approaching 5 years, 212 Barclays shares should generate round £97.65 in dividends.
Given the a lot greater yields accessible even elsewhere within the banking sector, that dividend alternative alone doesn’t tempt me to purchase any Barclays shares for my portfolio.
Sturdy share value efficiency lately
What, then, concerning the potential for capital good points?
Barclays shares have been sturdy performers lately. The worth is up 194% in 5 years.
That’s higher than the 170% achieved by Lloyds throughout that interval, however barely lags the 209% achieved by Natwest on the identical timeframe.
Nonetheless, I might be very proud of any a type of performances! Barclays shareholders who purchased 5 years in the past and completed nothing since have virtually tripled their cash, even earlier than taking dividends under consideration.
Too late to the occasion?
Previous efficiency shouldn’t be essentially a information to what to will occur in future.
The components underpinning Barclays’ sturdy efficiency lately stay in place. The corporate has a robust model and operates in a number of markets.
In contrast to retail-focused rivals like Lloyds and Natwest, it has a big funding banking operation to enrich its retail banking enterprise. That may assist enhance earnings when the financial system is doing effectively, although it provides dangers in a downturn as funding banking demand can dry up quick — and the wage invoice for such an operation is all the time substantial.
Barclays’ credit score impairment costs final 12 months moved up, from £2bn to £2.3bn. If the worldwide financial system weakens amid ongoing geopolitical uncertainty, defaults may rise additional, hurting profitability.
That might make it laborious to justify the present valuation, which sits above e book worth. In a weak sufficient financial system, I may see the shares dropping worth in comparison with the place they’re now, as that price-to-book worth ratio falls and a few e book values get written down.
If, although, the enterprise retains doing effectively, the share value may transfer increased nonetheless.
Given world financial uncertainty and Barclays’ intensive worldwide footprint, the stability of potential dangers and rewards doesn’t attraction to me proper now, so I’ve no plans to take a position.
