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Barclays Dividend Forecast: 2023, 2024, 2025, 2026, 2027 Analyst Predictions

The Barclays dividend forecast is growing increasingly higher as interest rates rise. But it be sustained in the long run?

by | Last updated 16 Aug, 2023 | Financials

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The Barclays Plc (LSE:BARC) share price is off to a good start in 2023, and with interest rates on the rise, analysts are becoming increasingly bullish on the bank’s dividend forecast. As a reminder, Barclays is the second-largest bank in the United Kingdom, catering to both businesses and consumers.

The last decade has been relatively challenging for banking stocks. After all, near zero per cent interest rates don’t exactly create a profitable lending environment. But now that rates are being hiked to combat inflation, conditions seem to be improving.

Let’s explore the firm’s latest performance and inspect what analysts predict will happen with dividends over the next four years.

How are the financials looking in 2023 so far?

Looking at the latest quarterly results, Barclays has been exhibiting strong income momentum and returns across the board. CEO Coimbatore Venkatakrishnan reported a 17% overall revenue growth year-on-year, with the firm’s Consumer, Cards & Payments division leading the charge at 54%.

Diving deeper into what’s driving top-line earnings reveals an increase in payment transaction volumes. But it seems a large portion of growth also stems from the firm’s net interest margin increasing by 0.3%. That may not seem like much, but it can have an enormous impact when scaled over billions of pounds worth of loans.

As such, the total group income came in at £6.4bn, translating into £1.97bn of pre-tax profit. This not only increased earnings-per-share by 17.5% to 9.4p but also shifted the banking stock’s return on tangible equity (RoTE) to 12.5% for the third quarter. That’s firmly ahead of management’s target of 10% and is encouraging news for income investors seeking to profit from dividends now and in the future.

What is the Barclays dividend forecast for 2023 & 2024?

Barclays is committed to maintaining an appropriate balance between delivering attractive total cash returns to shareholders, investment in the business, and maintaining a strong capital position. At least, that’s what management claim. But looking at the group’s track record, I think it’s fair to say they’ve been keeping their word.

The bank plans to continue its dividend payments semi-annually, with the half-year dividend expected to represent, under normal circumstances, around one-third of the total dividend for the year.

The half-year dividend for the period ended 30 June 2022 of 2.25p per ordinary share was paid in September 2022. That means the full 2022 dividend is announced as 6p, which is a whopping 6-fold increase from 2021. Yet, this has come in lower than analyst expectations.

Barclays Historical Dividend201720182019202020212022
Dividend Forecast6.5p3.0p0.0p4.75p7.0p7.5p
Actual Dividend6.5p3.0p1.0p6.0p6.0p7.25p
Beat Expectations?
Source: Barclays Dividends & Share Buybacks

As previously mentioned, rising interest rates typically work in favour of UK banks. And Barclays is no exception. As such, analysts are becoming more bullish on dividends over the next four years.

Barclays Dividend Forecast20232024202520262027
Dividend Forecast8.5p10.02p11.89p13.08p14.39

As with any forecast, it’s important to remember that there is always a degree of uncertainty. And while Barclays has a good track record of meeting expectations, there is never a guarantee. However, suppose the firm can deliver on these forecasts. In that case, the forward dividend yield for 2023 currently stands at 4.04%. This expected yield increases to 4.85%, 6.46%, and 7.11% for 2024, 2025, and 2026 respectively.

It’s also worth pointing out the bank has been returning excess capital to shareholders through share buybacks as well. Between March 2021 and October 2022, the bank repurchased roughly £2.7bn worth of shares.

Should I buy Barclays shares for the income?

Trading at a price-to-earnings P/E ratio of 4.6, Barclays stock looks relatively cheap, in my opinion. This, coupled with a fairly solid track record of meeting dividend forecast expectations, makes me cautiously optimistic about the long-term sustainability of shareholder payouts.

However, while rising interest rates are proving beneficial at the moment, this tailwind may turn into a headwind. If the cost of borrowing increases too much, demand for loans will undoubtedly begin to drop while the risk of default rises, leading to higher bad debt. Even more so now that UK unemployment is beginning to rise.

In the worst-case scenario, the bank may see its rising income start to reverse. Needless to say, that wouldn’t bode well for dividends.

The bottom line

Barclay’s dividend forecast and the company’s investment in share buybacks are promising indicators for investors. Moreover, with the continuous improvement in the overall bank’s income and profitability, I am optimistic about the bank’s future.

The UK economy is giving off some distressing signals. However, I believe Barclays stock is a good investment for my personal portfolio in the current situation. Therefore, I may buy some shares once I have more capital at hand to profit from the income it offers.

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Saima Naveed does not own shares in any of the companies mentioned. The Money Cog has no position in any of the companies mentioned. Views expressed on the companies and assets mentioned in this article are those of the writer and, therefore, may differ from the opinions of analysts in The Money Cog Premium services.

Written By

Saima Naveed

Saima spent the early days of her career advancing the finance office of a prominent manufacturing business. After taking a sabbatical, she decided to use her expert knowledge and apply it to the stock market. Now, 10 years later, she manages a substantial portfolio built using detailed and thorough analysis.

Outside The Money Cog, Saima is an avid supporter of empowering women in the workplace. She is currently working very closely with Women of Wonders Pakistan to help other women achieve their career goals.

Current Holdings

PSX: CENERGY, PSX: FFL, PSX: PCAL, PSX: PKGS, PSX: SHEZ, PSX: SIEM

Edited & Fact Checked By
Zaven Boyrazian MSc

Zaven has worked in several industries throughout his career, from aircraft factories to game development studios. He has been actively investing in the stock market for the better part of a decade, managing over $1 million across multiple portfolios.

Specializing in corporate valuation, Zaven employs a modern take on the principles set out by Benjamin Graham to find new opportunities at fair prices.

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