Barclays (LSE: BARC) shares recently hit their highest level since early 2018. Investors who bought the stock one year ago have enjoyed strong gains. But anyone who has held the stock for longer might be less happy.
Here, I’m going to crunch the numbers on Barclays’ shareholder returns and ask if the bank’s share price can continue climbing in 2022. Should I consider adding Barclays to my portfolio?
Have long-term shareholders made any money?
Let’s start by looking at the total shareholder return generated by Barclays over the last five years. Total return is the sum of share price movements plus dividends — the total gain to shareholders.
Checking back through the data, I can see Barclays has paid dividends of 17.5p per share since the start of 2017. Over the same period, the stock has fallen from 229p to around 212p, a drop of 17p. Unfortunately, this cancels out the dividends received over the last five years.
That’s right. Give or take the odd penny, Barclays shares have delivered a total return of 0% since the start of 2017. An investment of £1,000 five years ago would still be worth £1,000 today.
To put that into context, the FTSE 100 — which hasn’t been a great performer — has delivered a total return of around 25% over the same period.
The only comfort for shareholders is that Lloyds’ performance was even worse.
However, investing is all about the future. If Barclays’ current strong run continues under its new CEO, who is known as Venkat, the bank may be able to rebuild its reputation with investors.
Barclays shares: what’s the outlook?
Big FTSE 100 stocks are covered intensively by City analysts with detailed models. So rather than trying to forecast the bank’s earnings myself, I think it makes sense to take a look at the consensus view from the City.
The news is a bit mixed. The good news is that broker forecasts suggest Barclays’ dividend will rise by 33% to 8.1p per share in 2022, giving a forecast yield of 3.9%.
However, after a strong performance in 2021, Barclays’ earnings are expected to fall by around 20% in 2022. I think the main reason for this is that Barclays’ investment bank — which handles corporate business — saw a big increase in activity during the pandemic. This is now returning to more normal levels.
Would I buy BARC today?
At a price of 212p, Barclays shares are valued at eight times 2022 forecast earnings, with a 3.9% dividend yield. The shares also trade more than 25% below their tangible book value of 287p per share.
These numbers look cheap to me, assuming the bank’s profits are broadly in line with expectations this year. However, I think it’s worth remembering that former boss Jes Staley has only recently departed under a cloud. Venkat is probably still finding his feet. I don’t yet know what might change.
Barclays’ profitability also remains relatively low, which could limit profit (and share price) growth.
On balance, I think Barclays shares could have a bit further to go from current levels, but I don’t see the bank as a bargain, at current levels. I’d prefer to wait for a market dip to provide a better buying opportunity.