So far, 2023 hasn’t been a sparkling year for the UK’s blue-chip FTSE 100 index. As I write, it has lost 1.2% of its value since 30 December 2022.
Down goes the Footsie
That said, the index hit an all-time high of 8,047.06 points on 16 February, shortly before a US banking crisis sent stocks tumbling around the globe. Since this peak, the Footsie has lost 8.5% of its value — not helped by a 3.8% fall in October.
Of course, some firms’ shares have performed worse than others over the last month. Indeed, 14 FTSE 100 shares lost 10% or more in October. Notably, three of the worst performers were bank stocks, one of which I discuss below.
Barclays takes a beating
For the record, my wife and I bought Barclays (LSE: BARC) shares for our family portfolio in July 2022 for 154.5p each. Currently, they trade at 129.84p, which means we’re sitting on a paper loss of 16% to date. Meh.
Right now, the Blue Eagle bank’s stock hovers just above its 52-week high of 128.12p, hit on Monday, 30 October. This is a far cry from its 2023 high of 198.86p, reached on 8 March.
Here’s how this widely held stock has performed over six different timescales:
| Five days | -3.0% |
| One month | -16.7% |
| Six months | -16.3% |
| Year to date | -18.1% |
| One year | -13.7% |
| Five years | -26.1% |
Over all periods ranging from five days to five years, this share has underperformed the wider index. However, the above figures exclude cash dividends, which are increasingly generous from Barclays.
Drawn by dividends
If I didn’t already own the stock, I’d be tempted to buy big today, simply because this share looks far too cheap to me. Indeed, with the bank’s valuation under £19.6bn, I’d gladly buy the whole bank if I had the necessary billions.
Indeed, Barclays shares look compelling value to me right now. They trade on a lowly earnings multiple below 3.9, for a whopping earnings yield of 25.8%. This means that their market-beating cash yield of 5.9% a year is covered a hefty 4.4 times by trailing earnings.
Of course, future dividend payouts aren’t guaranteed, so they can be cut or cancelled at any time. But the bank has been steadily lifting its cash distributions. After a 1p payout in Covid-battered 2020, the dividend rose to 6p in 2021 and then 7.25p for 2022.
What’s more, the interim dividend for 2023 was 2.7p, a 20% increase over 2022’s 2.25p. I’m expecting a similar rise for the full-year dividend, taking the total payout for 2023 to 8.7p. This means the stock offers a potential forward dividend yield of 6.7% a year. Nice.
Tough times to come?
Then again, with the UK economy weakening, now’s hardly a great time to be a big bank. Rising interest rates, stubborn inflation and sky-high energy bills are hammering disposable incomes. Hence, I fully expect banks’ bad debts and loan losses to hit their earnings in 2023-24.
Nevertheless, we won’t be selling our stake in this FTSE 100 ‘fallen angel’ at anywhere near current prices. And while we wait for the Barclays share price to recover, we will happily this bank’s big dividends!
