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FTSE 100 financial institution Barclays (LSE:BARC) stays one of many UK’s hottest blue-chip shares. Even because the UK economic system struggles for traction, investor curiosity on this cyclical share stays rock stable.
One purpose could possibly be its gigantic dividend yield for the following few years. Its huge 6.1% yield for 2023 marches to six.9% and eight% for 2024 and 2025 respectively.
Each readings beat the broader Footsie‘s ahead common of three.9% by a giant distance.
I’m in search of prime dividend shares to purchase for my very own portfolio within the new 12 months. Might Barclays be the passive revenue inventory I’ve been looking for?
Glorious forecasts
The dividends on Barclays shares have recovered strongly following the tip of the Covid-19 disaster. And analysts expect this momentum to proceed by way of the medium time period no less than.
An improved 8.55p per share reward for 2023 is tipped to rise to 9.74p subsequent 12 months, and once more to 11.19p in 2025.
The Metropolis’s revenue forecasts for the financial institution counsel these estimates look fairly sensible too. Dividend cowl sits at 3.2 instances and three.3 instances for 2024 and 2025 respectively. Any studying above 2 instances offers a large margin of security for buyers.
Barclays’ stable steadiness sheet provides extra power to these dividend projections. Its CET1 capital ratio stood at 14% as of September.
However is Barclays a purchase?
UK banks are famed for being beneficiant dividend payers. Their well-managed share portfolios and diversified revenues streams produce steady earnings and money flows over time.
Nonetheless, gloomy progress forecasts for the British and US economies from subsequent 12 months counsel potential bother for Barclays. Whereas it might not affect dividends to an enormous diploma, it might lead to additional share worth falls that outweigh the monetary profit of huge dividends.
Underlining the weak state of the home economic system, the British Chambers of Commerce not too long ago mentioned that “the UK economic system stays on target to keep away from a technical recession, however progress is more likely to stay so feeble that it is going to be exhausting to identify the distinction”.
UK progress is tipped to fall from 0.4% this 12 months to a still-weaker 0.3% in 2024. This may solid recent doubt on Barclays’ already-poor earnings forecasts and push the FTSE financial institution even decrease.
Hassle coming
Retail banks like this face a protracted interval of weak mortgage progress and higher-than-normal dangerous loans. As if this wasn’t sufficient, in addition they face a pointy fall of their web curiosity margins (NIMs).
The Financial institution of England is tipped to stop its fee mountain climbing cycle. And strain from its competitors and the Monetary Conduct Authority might put additional pressure on its margins.
Barclays has already slashed its NIM forecasts for the brand new 12 months. It now predicts margins of three.05-3.10%, down from a previous vary of three.15-3.2%, information that naturally prompted Metropolis brokers to chop their earnings forecasts.
As I say, the financial institution’s dividend forecasts are extremely engaging. However I want extra to persuade me to purchase Barclays shares at this time. Proper now, I’d quite put money into different high-yield FTSE 100 shares.
