In the case of FTSE 100 dividend shares, Barclays (LSE: BARC) is one I needed to contemplate. I needed to dive into this sturdy performing Footsie inventory, with its sturdy observe file in UK banking and a renewed concentrate on shareholder returns, as a possible choice for revenue.

Share price positive factors

The corporate’s share price is up over 80% up to now yr, climbing to 314.4p as I write on 3 March. This rally has been pushed by stable earnings, important cost-cutting efforts, and a concentrate on returning capital to shareholders.

In its newest outcomes, the financial institution reported a 23% enhance in third-quarter income to £1.6bn. Greater rates of interest and a sturdy mortgage e book, in addition to sturdy funding banking division efficiency, all performed their half.

A brand new £1bn buyback introduced in February 2025 is the newest step in a plan to return £10bn to shareholders over two years. 

Valuation

Barclays at the moment presents an annual dividend yield of two.8%. The financial institution declared a complete dividend of 8.4p per share for 2024, up from 8p the yr prior.

That’s not the very best yield within the FTSE 100, and is definitely under the three.5% common for the UK large-cap index. Nevertheless, the payout is nicely supported by earnings with dividend cowl of 4.3 instances.

On the valuation entrance, I assumed I’d check out a few widespread metrics to dimension up the financial institution versus the market and its friends.

Barclays trades on a price-to-earnings (P/E) ratio of 8.5, which is under the FTSE 100 common of round 17. Nevertheless, monetary companies corporations do are likely to commerce at decrease multiples. For instance, NatWest and Lloyds are buying and selling at P/E ratios of 8.7 and 11, respectively.

One key valuation metrics for banks it the price-to-book (P/B) ratio, which stands at 0.6 for Barclays. This implies the financial institution’s shares are buying and selling under their e book worth on the stability sheet. 

The financial institution does look cheaper than Natwest (0.95) and Lloyds (0.91), that are each nearer to par. This might make Barclays a steal, or replicate a number of the uncertainty across the transformation programme underway.

Weighing it up

Barclays has been on a unbelievable run and has quite a bit going for it as a FTSE 100 dividend inventory. A gradual enhance in its dividend lately, in addition to a dedication to returning cash to shareholders, has helped enhance valuations larger.

Each the P/E and P/B ratios are encouraging. Nevertheless, there’s nonetheless loads of uncertainty.

Rates of interest look like headed decrease, which may influence the financial institution’s internet curiosity revenue because it fights to maintain deposits excessive and its lending margins may very well be squeezed.

There may be additionally the ever-present risk of an financial downturn, which could enhance default charges and non-performing loans.

Volatility in monetary companies shares is one cause I’ve determined to not Barclays shares proper now. Given the present state of the financial system, I’d slightly have a look at extra defensive sectors like prescription drugs in the meanwhile.