6.2% dividend yield! Should I buy this dirt-cheap FTSE 100 stock?

FTSE 100 The stock has lost a collective 5% in value since early March. As a long-term investor, I find this very good. It gave me the chance to buy some brilliant companies at knock-down prices.

British banks like Barclays (LSE:BARC) has fallen sharply in recent weeks.

The weakness may be due to concerns about the global banking sector. But the valuation of FTSE companies now appears to require serious attention.

Barclays’ share price trades at a forward price-to-earnings (P/E) ratio of 4.7 times. It also offers a dividend yield of 6.2%.

I’ve had a fresh look at the high street bank. And even at current prices, I can’t afford to buy stocks for my investment portfolio. Here is the reason.

Rate the uncertainty

Look, all is not well for UK banks. For one thing, I like interest rate hikes that provide profit.

Last week, the Bank of England raised the benchmark again for the 11th time, to 4.25%. Extra monetary tightening may be around the corner as policymakers act to curb inflationary pressures. The higher rate widens the gap between Barclays and its peers’ rates for savings and loan products.

However, huge uncertainty remains about future interest rate movements as the UK economy works hard. There is also pressure on banks to offer better rates to savers with more threats to margins.

A report by Sky news says savers are losing an astonishing £23bn a year because banks are not passing on the benefits of interest rate rises to their customers. The scandal could lead to new scrutiny of high-profile banks’ practices from the Financial Conduct Authority (FCA).

Competitive threat

Bad press can also boost consumer interest in challenger banks and the growing number of digital ones. Customer interest in this new carrier has been accelerating.

Price comparison website Finder says almost a quarter of Britons already have a digital-only bank account. And it predicts the number of digital bank account holders will only increase to 22.6m by 2028, from 12.6m today.

Demographic challenges

Barclays has key features to offer. Since its establishment 332 years ago, the business has developed one of the strongest brands in the banking industry.

The importance of customer trust cannot be underestimated when dealing with people’s money. The Finder study also revealed that 24% of traditional bank account customers “don’t rely on digital banks alone“.

However, Barclays seems to be swimming against the tide as a new generation of banking customers with a different perspective emerges.

Finder’s research also revealed that 31% of Gen Z consumers – those born in the mid to late 1990s – already have a digital-only banking account. Plan 18% more to get one by the end of the year.

Clearly, the pull of traditional operators like Barclays continues to diminish. And this casts a long shadow over the long-term profitability prospects of FTSE companies.