Why Barclays PLC Should Be A Winner Next Year

We should see a rebound from Barclays PLC (LON: BARC) in 2014.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

There’s a little light appearing at the end of the banking tunnel these days, and in my perusal of 2014’s prospects for some of out top FTSE 100 companies, I’m turning my attention today to Barclays (LSE: BARC) (NYSE: BCS.US).

Barclays escaped the need for a government bailout by finding enough fresh private capital to evade disaster, and though it hasn’t exactly had a good time in recent years, at least we haven’t seen any of the eye-watering losses suffered by some.

Here’s Barclays’ five-year summary:

Should you invest £1,000 in Just Eat Takeaway.com right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Just Eat Takeaway.com made the list?

See the 6 stocks

Dec Pre-tax EPS EPS Growth
Dividend Div Growth
Div Yield Div Cover
2008
£5,136m 47.60p -25% 10.65p   7.5% 4.5x
2009 £4,585m 22.32p -53% 2.31p -78% 0.9% 9.7x
2010 £6,065m 28.15p +26% 5.09p 120% 2.1% 5.5x
2011 £5,770m 25.65p -9% 5.56p 9.2% 3.4% 4.6x
2012 £797m 31.95p +24% 6.02p 8.3% 2.5% 5.3x
2013 (f)
£3,855m 23.94p -25% 6.48p 7.6% 2.4% 3.7x
2014 (f)
£4,782m 29.70p +24% 10.62p 64% 3.9% 2.8x

One thing that immediately strikes me is that looking at those 2008 figures which show a dividend yield of 7.5% covered 4.5 times by earnings, it looks like a pretty impressive bargain — especially when we think that the shares were on a year-end price-to-earnings ratio (P/E) of just 3!

Of course, by then it was pretty certain that profits were headed for a fall and the dividend was going to be slashed.

Hindsight

But still, if you buy a FTSE 100 company on a P/E of 3, you’re likely to either lose your money or make a killing — and we now know which it was. Just before those 2008 results were known in February 2009, Barclays shares were changing hands for around 50p apiece — and they have more than five-bagged since then to 265p!

Maximum pessimism, that’s what we had, and that’s always a good time to buy.

But what if you buy Barclays now?

Falling profit this year

Well, we can see there’s a 25% fall in earnings per share (EPS) currently forecast by the boys in the City, and that puts the shares on  forward P/E of just 11, which is below the FTSE’s average of around 14. And if those 2014 forecasts for a 24% rebound in EPS and a massive 64% hike in the dividend come off (and some recent forecasts are even higher), we’ll be looking at a P/E of under 9 and a dividend yield of 3.9%.

So how are things progressing?

But great prospects

In the bank’s third-quarter update released on 30 October, chief executive Antony Jenkins said the results “demonstrate the underlying strength of the Group, and the benefits of diversity, shown in the good progress made by several of our businesses in the quarter and year to date” and picked out UK Retail and Business Banking and a few other divisions for praise. He also told us that the bank is on to meet PRA leverage requirements by 2014.

An adjusted pre-tax profit of £4,976m was recorded, and the bank’s adjusted core tier 1 ratio was up to 11.3% — and I reckon that’s all setting a solid foundation for a return to growth in 2014.

Along with the other banks, Barclays has been a naughty boy — but it’s time to let it back in off the naughty step now.

Verdict: A return to winning ways in 2014!

AI Revolution Awaits: Uncover Top Stock Picks for Massive Potential Gains!

Buckle up because we're about to dive headfirst into the electrifying world of AI.

Imagine this: you make a single savvy investment in some cutting-edge technology, then kick back and watch as it revolutionises entire industries and potentially even lines your pockets.

If the mere thought of riding this AI wave excites you and the prospect of massive potential returns gets your pulse racing, then you’ve got to check out this Motley Fool Share Advisor report – 'AI Front Runners: 3 Surprising Stocks Riding The AI Wave’!

And here’s the kicker – we’re giving you an exclusive peek at ONE of these top AI stock picks, absolutely free! How’s that for a bit of brilliance?

Get your free AI stock pick

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

> Alan does not own any shares mentioned in this article.

More on Investing Articles

Investing Articles

2 stocks that could help investors earn £2,516 of passive income per year from a £20k ISA

Our writer selects two high-yield UK dividend shares for investors to consider that could turbocharge a passive income portfolio.

Read more »

British union jack flag and Parliament house at city of Westminster in the background
Investing Articles

Why I think FTSE 100 dividend shares could build a better second income than the S&P 500

US tech stocks are hot, but when aiming for a sustainable second income later in life, our writer prefers dividend-paying…

Read more »

Investing Articles

2 blue-chip FTSE 100 shares Hargreaves Lansdown investors have been buying in the market sell-off

When global markets were in meltdown mode, Hargreaves Lansdown investors recently piled into these two well-known FTSE 100 names.

Read more »

A pastel colored growing graph with rising rocket.
Investing Articles

Investors considering £10,000 of Sainsbury’s shares could one day make £2,590 a year in dividend income!

Sainsbury’s shares deliver a yield significantly over the FTSE 100’s 3.8% average and they also look very undervalued against their…

Read more »

Trader on video call from his home office
Investing Articles

After a 12% drop in a month, is it finally worth me buying this rare FTSE technology stock?

A scarcity of technology shares in the FTSE 100 pushed the prices of many beyond their fair value, I think.…

Read more »

Young Asian woman with head in hands at her desk
Investing Articles

How can I protect my 2025 Stocks and Shares ISA against tariff war pain?

Just when we were looking forward to a new Stocks and Shares ISA allowance for 2025-26, the world is thrust…

Read more »

Mature black couple enjoying shopping together in UK high street
Investing Articles

As WH Smith shares rise despite its H1 loss, I still think they’re good value

Shares in retail companies have been having a tough time recently, but does the latest FTSE 250 stock to report…

Read more »

Investing Articles

The top 3 mistakes to avoid if the stock market crashes

When the stock market dips, it can make even the hardiest of investors quiver at the knees. But no matter…

Read more »