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Relating to FTSE 100 dividend shares, Barclays (LSE: BARC) is one I wished to think about. I wished to dive into this robust performing Footsie inventory, with its robust observe report in UK banking and a renewed deal with shareholder returns, as a possible possibility for earnings.
Share value features
The corporate’s share value is up over 80% previously 12 months, climbing to 314.4p as I write on 3 March. This rally has been pushed by stable earnings, important cost-cutting efforts, and a deal with returning capital to shareholders.
In its newest outcomes, the financial institution reported a 23% improve in third-quarter earnings to £1.6bn. Increased rates of interest and a strong mortgage e-book, in addition to robust 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 the moment gives 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 12 months 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. Nonetheless, the payout is effectively supported by earnings with dividend cowl of 4.3 occasions.
On the valuation entrance, I assumed I’d check out a few frequent 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. Nonetheless, monetary companies 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 e-book worth on the stability 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 replicate a few of the uncertainty across the transformation programme underway.
Weighing it up
Barclays has been on a incredible run and has lots going for it as a FTSE 100 dividend inventory. A gentle improve in its dividend lately, in addition to a dedication to returning cash to shareholders, has helped enhance valuations larger.
Each the P/E and P/B ratios are encouraging. Nonetheless, there may be nonetheless loads of uncertainty.
Rates of interest seem like headed decrease, which might influence the financial institution’s web curiosity earnings because it fights to maintain deposits excessive and its lending margins might be squeezed.
There’s additionally the ever-present menace of an financial downturn, which could improve default charges and non-performing loans.
Volatility in monetary companies shares is one motive I’ve determined to not Barclays shares proper now. Given the present state of the economic system, I’d relatively have a look at extra defensive sectors like prescription drugs in the interim.
