Prediction: in 12 months the Barclays share worth and dividend may flip £10,000 into…

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The Barclays (LSE: BARC) share worth has had a storming run. It’s up 58% during the last 12 months and a staggering 266% over 5 years.

These are spectacular figures from a supposedly large and boring British blue-chip. It’s yet one more reminder of how underrated FTSE 100 shares could be. And people numbers are earlier than accounting for all of the dividends paid over the identical interval.

Present buyers shall be thrilled, the remainder of us kicking ourselves for lacking out. Previous efficiency isn’t a information to the long run, however there are nonetheless methods of judging the place Barclays shares could go subsequent.

Valuation’s nonetheless cheap

I like to begin with a inventory’s valuation, sometimes its price-to-earnings (P/E) ratio. Regardless of its latest surge, Barclays stays surprisingly low-cost at 10.6. That’s nicely under the 15 typically seen as truthful worth. The important thing motive is that it’s nonetheless making baggage of cash to justify that P/E. Earnings per share jumped 62% within the yr to 30 June, which adopted a 33% rise the earlier yr.

The value-to-book ratio is one other useful measure for banks. Barclays sits round 0.7, comfortably beneath the determine of 1 seen nearly as good worth, whereas a determine of as much as 2 is usually acceptable. This implies there’s nonetheless room for progress, offered income proceed flowing.

Robust quarterly outcomes

Barclays’ Q3 outcomes, printed on Wednesday (22 October), confirmed a 7% drop in income to £2bn. That was largely as a result of an additional £235m provision for the UK motor finance scandal, which introduced whole impairments to £325m. Its funding financial institution additionally booked a £110m credit score impairment.

Brokers assume these are simply bumps on the highway. AJ Bell’s Russ Mould famous the financial institution is on monitor for its best-ever yr for pre-tax revenue, barring unexpected issues, and may beat the £8.4bn made in 2021.

Consensus analyst forecasts produce a one-year median goal at 429p. If appropriate, that will mark a 11.2% improve from as we speak. That’s fantastic, however notably slower than latest positive aspects. It could mirror wider issues a couple of US-driven market slowdown that might hit Barclays’ funding banking arm.

The trailing dividend yield’s simply 2.2%, anticipated to edge as much as 2.4%. Including this offers a complete projected return of 13.6%. That will flip a £10,000 funding into £11,360. It’s not an in a single day fortune, however that’s not what buyers ought to look from shopping for FTSE 100 shares.

The true advantages come through regular long-term compound progress from a rising share worth and reinvested dividends. That additionally permits buyers to look previous short-term market swings.

Share buyback spree

There’s a motive for that low dividend yield. Barclay plans to return a bumper £10bn to shareholders between 2024 and 2026, partly by dividends however largely through share buybacks.

Yesterday, it shocked buyers by saying a quarterly £500m buyback, with extra to return. I personally desire dividends, however received’t complain about buybacks, as they need to additionally enhance returns over time.

I believe Barclays shares are nonetheless value contemplating as we speak. I favour a long-term view, given all the troubles a couple of potential inventory market crash (however that goes for nearly any inventory as we speak). Barclays is a superb reminder that FTSE 100 shares are nonetheless wonderful solution to construct long-term wealth.