Barclays (LSE: BARC) shares offer a nice dividend yield right now. Last year, Barclays declared total dividends of 6p per share. At the current share price of 165p, that equates to a yield of around 3.6%.
Is the company set to continue rewarding shareholders with attractive dividends in the years ahead? Let’s take a look at the Barclays dividend forecast for this year and next.
Dividend forecasts for 2022 and 2023
After paying out 6p per share in dividends for 2021, Barclays is expected to increase its payout this year and in 2023. Currently, Refinitiv data shows that analysts expect the bank to pay out 7.3p per share for 2022 and 8.89p per share the year after.
This means that Barclays could potentially be a bit of a cash cow in the years ahead. At today’s share price, these projected payouts for 2022 and 2023 equate to yields of 4.4% and 5.4%. These are attractive yields in today’s low-interest-rate environment.
It gets better though. You see, Barclays is also returning capital to shareholders via share buybacks. In its recent half-year results, the company said it intended to initiate a £500m buyback. These buybacks will reduce the number of Barclays shares on the market. This could boost earnings per share (and potentially the share price) over time.
Take dividend forecasts with a grain of salt
Now, it’s worth pointing out that the dividend forecast figures above are just estimates. So, there’s no guarantee that the bank will pay these kinds of dividends.
My own calculations suggest the payout for 2022 may not be as high as the forecast figure. That’s because the bank recently declared a dividend of 2.25p for H1 2022 and said that this is expected to represent around one third of the total dividend for the year. So, the payout for 2022 could be closer to 6.75p.
However, the good news is that dividend coverage (the ratio of earnings to dividends) is very high. This indicates that there’s a low chance of a dividend cut in the near term.
Would I buy Barclays shares today?
So, would I buy Barclays shares for my own portfolio today?
Well, I can certainly see some appeal in the stock right now. For starters, it’s dirt cheap. With analysts expecting the company to generate earnings per share of 31.1p for 2022, the forward-looking P/E ratio is just 5.3.
Secondly, the bank looks set to benefit from higher interest rates.
On the other hand though, Barclays could potentially suffer from the economic contraction that the UK and other countries are experiencing right now. During economic downturns, loan defaults tend to rise, hitting bank profits.
Another risk to consider is the growing competition in the banking space. In recent years, a number of new digital banks have entered the industry. This trend looks set to continue. Barclays is going to have its work cut out to maintain market share.
Weighing everything up, I’m happy to keep Barclays shares on my watchlist for now. All things considered, I think there are better stocks I could buy today.
