This has been a lively year for the Barclays (LSE: BARC) share price, which swung wildly at times. Yet despite a positive start to 2023, the stock is set to end the year down.
Surge and slump
As I write, the Blue Eagle bank’s shares trade at 153.82p, valuing the group at £23.3bn. This makes Barclays the 26th-largest business in the FTSE 100.
On 30 December 2022, the stock closed at 158.52p, so it has lost 3% this calendar year. However, following an early spurt to 2023, the shares hit a 52-week high of 198.86p on 8 March.
This initial gain didn’t hold, as a brief but intense US banking crisis sent financial stocks crashing worldwide. Within days, Barclays shares had lost 35% of their value, stunning shareholders (including me).
However, after bouncing back from late March to mid-September, they dived again to hit their 2023 low of 128.12p on 30 October. At this point, I saw this stock as a screaming buy. It has since leapt by 20%.
Barclays has been a long-term lemon
My wife and I bought this stock for our family portfolio in July 2022 at 154.5p a share. Hence, we’re roughly breaking even on our buy so far.
As an old-school value/income/dividend investor, I regard Barclays as a classic value play. Still, its shares have been a long-term let-down, losing 3.1% over one year and up only 2.5% over five years.
Yet at current levels, I continue to see this stock as one of the FTSE 100’s biggest bargains. It trades on just 4.6 times earnings, for a huge earnings yield of 21.8%. The Footsie’s figures are 11.3 and 8.8%, respectively.
What’s more, the market-beating dividend yield of 5% a year is covered a powerful 4.4 times by trailing earnings. This makes it one of the best-covered high yields in the market.
A binary bet on recovery in 2024?
My family bought into Barclays for its generous stream of dividends. Here are its shareholder payouts since the coronavirus lows of 2020:
| Financial year | Dividend per share |
| 2021 | 6p |
| 2022 | 7.25p (up 20.8%) |
| 2023 | 2.7p* (up 20%) |
After lifting its cash payout by over a fifth in 2022, the bank then did much the same with this year’s interim dividend. I expect a final payment of 6p for 2023, paid in late March or early April 2024.
That said, UK economic growth has been close to zero in 2023 and many economists predict a recession next year. If this happens, Barclays could see its revenues, earnings and cash flow sliding.
Also, further pressure on households from inflation, hefty energy bills and higher interest rates could increase provisions for bad debts and loan losses. In addition, rate cuts would shrink the margins Barclays makes between lending and savings rates.
Despite this, I see the Barclays share price as a brilliant bargain today. Indeed, I have high hopes of it reaching £2 in 2024. That’s 30% above the current price. I could be wrong, but how might it get there?
First, rising earnings driven by a revival at the US investment bank. Second, by continuing to lift its dividends. Third, from higher earnings per share due to a smaller share base. Fourth, from lower bad debts boosting the bottom line. Fingers crossed I’m right!
