Like many other bank stocks, Barclays (LSE:BARC) shares have delivered incredible, incredible returns in recent years.
In the past 12 months alone, shareholders have enjoyed a 40% market rise. And if you push back to the beginning of 2024, these gains grow to nearly 180%. But the fun may be just beginning.
With earnings rising on the back of higher interest rates and better investment banking performance, the bank is on track to meet its 2026 performance targets. And after that, the management has now revealed the main targets for 2028, including the return plans. £15bn to the shareholders in the next three years.
For passive investors, Barclays can be a gold mine.
Income payment of £15bn
At 8.6p per share, around £1.2bn was paid to shareholders by 2025 in dividends. And compared to where Barclays is trading today, that puts the yield at a paltry 2%. However, that is about to change.
The management has already guaranteed a 66% increase in dividends by 2026, totaling £2bn. And when combined with the impact of the share buyback, analysts said Barclays’ dividend per share would almost double to 15p.
In other words, the real yield is much closer to 3.5%. And with dividend growth expected in both 2027 and 2028 as management delivers on a £15bn payout commitment, further, Barclays shares look like a good income opportunity right now.
So, how many shares does an investor need to buy today to target an income of £1,000 in 2026?
Clicking numbers
If the dividend rises to 15p as expected, then an investor would need to buy a total of 6,667 shares to earn £1,000 in income. At its current share price of around 425p, that means an investment of £28,335 in total.
Obviously that’s a significant sum. But there is nothing stopping investors from continuing to build this position over time, drip-feeding small amounts every month.
What’s more, by reinvesting any gains made along the way, even a modest investor could end up unlocking an income of £1,000, especially if Barclays continues to raise payments beyond 2026 as planned.
So, does this make sense?
Things to consider
Barclays’ impressive performance, supported by a friendly macroeconomic environment, has already seen a significant improvement in the bank’s all-important return on tangible equity (RoTE).
Looking ahead, management aims to strengthen RoTE even higher from 11.3% in 2025 to at least 12% in 2026 and then 14%+ in 2028. That certainly sets the stage for improved profits and shareholder payouts. But while it’s exciting, it’s important to remember that these benefits are not guaranteed.
As interest rates are gradually cut and Barclays’ profitable hedges approach maturity, a new storm for the bank’s lending business is slowly building.
Meanwhile, weakness creeps into US credit card operations. And while the current situation is far from dire, losses could mount quickly, especially if predictions of a possible US recession turn out to be true.
These two risk factors alone can ultimately prevent managers from delivering on their promises. Therefore, investors buying Barclays shares today may be left disappointed with the result.
Still, even with these risk factors, the stock’s relative valuation, combined with management’s impressive track record, makes Barclays shares worth considering, in my opinion.
