Like many other bank stocks, Barclays (LSE:BARC) shares have delivered staggering, impressive returns in recent years.
In the last 12 months alone, shareholders have enjoyed a 40% surge in market cap. And when zooming out to the start of 2024, these profits expand to almost 180%. But the fun could just be getting started.
With earnings surging on the back of higher net interest margins and superior investment banking performance, the bank is on track to meet its 2026 performance targets. And subsequently, management has now outlined even more ambitious targets for 2028, including plans to return £15bn to shareholders over the next three years.
For passive income investors, Barclays could be a goldmine.
A £15bn incoming payout
At 8.6p per share, approximately £1.2bn was paid out to shareholders in 2025 via dividends. And compared to where Barclays shares trade today, that puts the yield at a seemingly lacklustre 2%. Yet that’s about to change.
Management has already confirmed a 66% surge in dividends for 2026, totalling £2bn. And when combined with the impact of simultaneous share buybacks, analysts are projecting Barclays’ dividend per share to almost double towards 15p.
In other words, the actual yield is much closer to 3.5%. And with more dividend growth expected in both 2027 and 2028 as management delivers on its £15bn payout promise, on a forward basis, Barclays shares look like an attractive income opportunity right now.
So, how many shares does an investor need to buy today to target a £1,000 passive income in 2026?
Crunching the numbers
If dividends rise to 15p as expected, then an investor will need to buy a total of 6,667 shares to earn £1,000 in passive income. At its current share price of roughly 425p, that translates into a £28,335 lump sum investment.
That’s obviously a significant sum. But there’s nothing stopping investors from steadily building up this position over time, drip-feeding smaller sums each month.
What’s more, by reinvesting any dividends earned along the way, even a modest investor could eventually unlock a £1,000 passive income stream, especially if Barclays continues to hike payouts beyond 2026 as planned.
So, is this a no-brainer?
Things to consider
Barclays’ impressive operational performance, supported by a friendlier macroeconomic environment, has already seen a significant improvement in the bank’s all-important return on tangible equity (RoTE).
Looking further ahead, management is aiming to bolster RoTE even higher from 11.3% in 2025 to at least 12% in 2026 and then 14%+ by 2028. That certainly sets the stage for improved profits and shareholder payouts. But while exciting, it’s important to remember these gains aren’t guaranteed.
With interest rates being steadily cut and Barclays’ lucrative hedges approaching maturity, a new headwind for the bank’s lending business is slowly building.
Meanwhile, weakness is creeping into its US credit card operations. And while the current situation is far from dire, losses could quickly escalate, especially if the predictions of a potential US recession turn into reality.
These two risk factors alone could ultimately prevent management from delivering on its promises. As such, investors buying Barclays’ shares today could be left disappointed with the result.
Nevertheless, even with these risk factors, the stock’s modest valuation, combined with management’s impressive track record, makes Barclays shares worth mulling over, in my opinion.
