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With regards to FTSE 100 dividend shares, Barclays (LSE: BARC) is one I wished to think about. I wished to dive into this sturdy performing Footsie inventory, with its sturdy observe file in UK banking and a renewed give attention to shareholder returns, as a possible choice for earnings.
Share value positive aspects
The corporate’s share value is up over 80% up to now yr, climbing to 314.4p as I write on 3 March. This rally has been pushed by strong earnings, important cost-cutting efforts, and a give attention to returning capital to shareholders.
In its newest outcomes, the financial institution reported a 23% enhance in third-quarter earnings to £1.6bn. Greater rates of interest and a strong mortgage ebook, in addition to sturdy funding banking division efficiency, all performed their half.
A brand new £1bn buyback introduced in February 2025 is the newest step in a plan to return £10bn to shareholders over two years.
Valuation
Barclays at present affords an annual dividend yield of two.8%. The financial institution declared a complete dividend of 8.4p per share for 2024, up from 8p the yr prior.
That’s not the very best yield within the FTSE 100, and is definitely beneath the three.5% common for the UK large-cap index. Nevertheless, the payout is properly supported by earnings with dividend cowl of 4.3 instances.
On the valuation entrance, I believed I’d check out a few widespread metrics to dimension up the financial institution versus the market and its friends.
Barclays trades on a price-to-earnings (P/E) ratio of 8.5, which is beneath the FTSE 100 common of round 17. Nevertheless, monetary providers corporations do are inclined to commerce at decrease multiples. For instance, NatWest and Lloyds are buying and selling at P/E ratios of 8.7 and 11, respectively.
One key valuation metrics for banks it the price-to-book (P/B) ratio, which stands at 0.6 for Barclays. This implies the financial institution’s shares are buying and selling beneath their ebook worth on the steadiness sheet.
The financial institution does look cheaper than Natwest (0.95) and Lloyds (0.91), that are each nearer to par. This might make Barclays a steal, or mirror a number of the uncertainty across the transformation programme underway.
Weighing it up
Barclays has been on a implausible run and has quite a bit going for it as a FTSE 100 dividend inventory. A gradual enhance in its dividend in recent times, in addition to a dedication to returning cash to shareholders, has helped enhance valuations increased.
Each the P/E and P/B ratios are encouraging. Nevertheless, there’s nonetheless loads of uncertainty.
Rates of interest seem like headed decrease, which may affect the financial institution’s web curiosity earnings because it fights to maintain deposits excessive and its lending margins may very well be squeezed.
There’s additionally the ever-present risk of an financial downturn, which could enhance default charges and non-performing loans.
Volatility in monetary providers shares is one motive I’ve determined to not Barclays shares proper now. Given the present state of the financial system, I’d quite have a look at extra defensive sectors like prescription drugs in the intervening time.
