We recently compiled a list of the 10 Best FTSE Dividend Stocks To Buy Now. In this article, we are going to take a look at where Barclays PLC (NYSE:BCS) stands against the other FTSE dividend stocks.
Goldman Sachs Research predicts moderate growth for the UK economy in 2025, with GDP rising 1.2%. That is slightly below the Bank of England’s (BoE) 1.5% projection and the 1.3% consensus among economists. Moreover, growth is expected to slow as the year goes on, driven by trade uncertainties, tighter budgets, and changes in housing policies. However, inflation is likely to ease through 2025, which could lead to bigger interest rate cuts than the market expects. While most think the BoE will stop cutting rates at 4%, Goldman Sachs sees rates dropping further to 3.25% by mid-2026.
Building on this cautious economic outlook, fiscal policies are also expected to play a significant role in shaping growth. The UK’s autumn budget provided a near-term boost to demand but points to a consolidation in 2025, likely slowing growth later in the year. Inflationary pressures from public sector pay deals and higher taxes on services are expected to persist in the short term but should ease as wage growth slows and labor market tightness lessens.
Amid these broader economic challenges, UK investors may find some optimism in corporate dividends. AJ Bell’s latest Dividend Dashboard paints a positive picture for FTSE 100 dividends. Analysts expect payouts to grow by 1% in 2024 to £78.6 billion, followed by a 7% bump in 2025 to £83.9 billion, though still just shy of the 2018 record of £85.2 billion. This strong performance in dividends highlights a contrast to the broader economic challenges, offering a silver lining for investors. Share buybacks remain strong, with £49.9 billion already planned for 2024, on top of £52 billion last year. Combined with £11 billion in expected dividends from the FTSE 250 and £47.2 billion in takeovers, the FTSE 350 is set to deliver a whopping £189.7 billion in total cash returns. That works out to a cash yield of 7.7%, comfortably beating the Bank of England’s 5% base rate, the 3.92% 10-year gilt yield, and the 2.2% inflation rate.
Nevertheless, domestic companies are still grappling with significant headwinds, such as rising costs like National Insurance and minimum wage, all while operating in a sluggish economy. Investors are still favoring the US market, but falling interest rates could nudge some back toward UK stocks. Meanwhile, rising bond yields and pension plans shifting to UK equities might help stocks but could drive up government borrowing costs by reducing demand for gilts.
Our Methodology
For this article, we used the iShares Core FTSE 100 UCITS ETF. The fund aims to replicate the performance of an index comprising the 100 largest companies in the UK. From this fund, we focused on picking prominent stocks with stable yields and strong dividend policies. The list below is ranked in the ascending order of dividend yield as of January 3.
At Insider Monkey, we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here)
An investor looking at a stock chart, representing the bank’s securities dealing.
Barclays PLC (NYSE:BCS)
Dividend Yield as of January 3: 2.72%
Number of Hedge Fund Holders: 21
Barclays PLC (NYSE:BCS) is a global financial services company with operations spanning the UK, Europe, the Americas, Africa, the Middle East, and Asia. It operates through two primary segments – Barclays UK and Barclays International. On November 1, Barclays PLC (NYSE:BCS) completed the £600 million acquisition of Tesco’s banking operations, including credit cards, personal loans, and lending balances, with an additional £100 million pending after regulatory adjustments. Tesco Bank’s 2,800 employees will transfer to Barclays, which has also secured a 10-year deal to sell financial products under the Tesco brand.
Barclays PLC (NYSE:BCS) reported strong financial performance in Q3, with a return on tangible equity of 12.3% for the quarter and 11.5% year-to-date. Total Q3 income was £6.5 billion, reaching £19.8 billion year-to-date, bolstered by a stable income mix and a favorable structural hedge. Barclays PLC (NYSE:BCS) ended Q3 with a strong CET1 ratio of 13.8%, within its target range.
The bank achieved £700 million in cost savings year-to-date, on track for a £1 billion target in 2024, and progressed its nonstrategic business disposals, including the sale of an Italian mortgage portfolio. Barclays PLC (NYSE:BCS) is also completing a £750 million share buyback, part of its goal to return £10 billion in capital by 2026.
At the end of Q3 2024, 21 hedge funds were bullish on Barclays PLC (NYSE:BCS), compared to 20 funds in the prior quarter. Peter Rathjens, Bruce Clarke, and John Campbell’s Arrowstreet Capital was the leading stakeholder of the company, with 28.4 million shares worth $461.3 million. BCS is one of the best FTSE dividend stocks to look out for.
Overall BCS ranks 10th on our list of the best FTSE dividend stocks to buy now. While we acknowledge the potential of BCS as an investment, our conviction lies in the belief that certain AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than BCS but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.