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Image source: Getty Images <\/p>\n Image source: Getty Images <\/p>\n
A sum of \u00a320,000 invested in Barclays (LSE: BARC) shares just one year ago is today worth \u00a328,202.<\/p>\n
The lion\u2019s share of these gains \u2014 \u00a37,767 \u2014 came via the share price increase from \u00a33.27 to \u00a34.54. The remainder came from the 8.6p paid in dividends over the period \u2014 amounting to \u00a3526. Together, these profits represent a 41% total return over the last 12 months.<\/p>\n
But, as good as this is, the global banking giant may well do even better going forward, in my view.<\/p>\n
Rising dividends expected? <\/p>\n
Barclays is not one of the FTSE\u2019s great dividend payers, but its payouts have not been insubstantial over the past five years. And they have been rising.<\/p>\n
From 2021 to 2025, they increased from 6p to 8.6p. These generated average annual dividend yields in those years of 3.2%, 4.6%, 5.2%, 3.1%, and 1.8%. The declining returns despite rising payouts underline that dividend yields can go down as a stock\u2019s price rises.<\/p>\n
That said, analysts forecast the bank\u2019s dividend returns will rise to 3.3% this year, 4.1% next year, and 5% in 2028. These all compare very favourably to the present FTSE 100 average of 3.1%.<\/p>\n
In cash terms, \u00a320,000 of Barclays shares at an average 5% annual yield would make \u00a312,940 in dividends after 10 years. This factors in the dividends being reinvested into the stock, known as dividend compounding. And after 30 years on this basis, the dividends paid out would amount to \u00a369,355!<\/p>\n
Share price gains too? <\/p>\n
Discounted cash flow (DCF) analysis is often used by professional investors to forecast where a share price is headed. This model identifies the \u2018fair value\u2019 of any share, based on the key fundamentals of the underlying business.<\/p>\n
Knowing this number is crucial to the profits of long-term investors because historically share prices tend to converge to this fair value over time.<\/p>\n
To pinpoint this value, DCF modelling forecasts future cash flows for a business and discounts them back to the present. The more uncertain those forecasts are, the higher the return investors demand, increasing the discount rate.<\/p>\n
Analysts\u2019 DCF valuations may differ, depending on their assumptions. Based on my own modelling \u2014 including an 8.5% discount rate \u2014 Barclays shares look 52% undervalued at their current \u00a34.54 price.<\/p>\n
That implies a fair value of \u00a39.46, more than double the current level.<\/p>\n
So, if the markets continue to converge toward fair value and my DCF assumptions prove correct, this will mean a \u00a321,684 gain on a \u00a320,000 investment.<\/p>\n
Does the core business support such gains? <\/p>\n
Underpinning consistent share price and dividend gains are sustained increases in earnings.<\/p>\n
A risk to Barclays is a weakening in the UK economy that could push up bad\u2011debt charges. Another is falling interest rates that could squeeze deposit margins.<\/p>\n
That said, analysts forecast that the bank\u2019s earnings will increase by an average of 8.9% a year over the medium term at least.<\/p>\n
My investment view <\/p>\n
Barclays\u2019 strong earnings outlook and rising shareholder returns make it well worth investors\u2019 consideration, in my view.<\/p>\n
I already hold two stocks in the same sector \u2014 HSBC and NatWest. So, buying another would unsettle the risk\/reward balance of my overall portfolio.<\/p>\n
Instead, my attention has been caught by several deeply undervalued stocks in other sectors, many of which offer even higher yields than Barclays.<\/p>\n
Should you invest \u00a35,000 in Barclays Plc right now? <\/p>\n
When investing expert Mark Rogers and his team have a stock tip, it can pay to listen. After all, the flagship Twelfth Magpie Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Barclays Plc made the list? See The Six Stocks <\/p>\n
Simon Watkins owns shares in HSBC and NatWest.<\/p>\n
The post \u00a320,000 invested in Barclays shares a year ago is now worth\u2026<\/a> appeared first on The Twelfth Magpie<\/a>.<\/p>\n More reading<\/p>\n Motley Fool UK 2026<\/p>\n","protected":false},"excerpt":{"rendered":"Image source: Getty Images A sum of \u00a320,000 invested in Barclays (LSE: BARC) shares just one year ago…\n","protected":false},"author":2,"featured_media":54313,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":"","_share_on_mastodon":"0"},"categories":[21264],"tags":[3343,20874,5716,5692,3702],"class_list":["post-54312","post","type-post","status-publish","format-standard","has-post-thumbnail","category-barclays","tag-barclays","tag-dcf","tag-dividend-yields","tag-share-price","tag-shares"],"share_on_mastodon":{"url":"https:\/\/pubeurope.com\/@UnitedKingdom\/116679715265254756","error":""},"_links":{"self":[{"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/posts\/54312","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/comments?post=54312"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/posts\/54312\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/media\/54313"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/media?parent=54312"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/categories?post=54312"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/tags?post=54312"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}