Here’s the dividend forecast for Barclays shares in 2023 and 2024

Investors looking for passive income typically focus on dividend stocks. With a current yield of 5.2%, Barclays Shares (LSE:BARC) are good candidates. So, what dividends are analysts predicting for this year and next?

Profit to fly?

The recent crash in the banking sector has led to many declines in bank stocks. Barclays shares are no exception, down more than 25% from their 2023 high. However, the decline has led to a better dividend yield, and could also be a buying opportunity for me.

Although fears of a similar problem in the UK cannot be denied, Barclays remains one of the better banks to protect itself from such a scenario. This is because unlike our peers, Blue Eagle bank has a lower deposit base.

This comes from a lower percentage of risk-weighted assets. More importantly, most of the deposits are from retail customers, which means that a large amount of funds are insured by the Financial Services Compensation Scheme. This makes Barclays less vulnerable to bank runs.

I would even argue that Barclays shares could be a hidden gem in the current crisis. After all, customers have been withdrawing funds from small banks and depositing them into larger institutions. In fact, Barclays reported an uptick in deposit inflows since the collapse of SVB.

Better yet, lenders are looking forward to a positive year ahead. Management guides the net interest margin to continue to grow from 2.86% to at least 3.2%. In addition, it also expects a return on real equity (ROTE) of more than 10%.

Pay dividends

With more promising figures than last year, Barclays’ underlying earnings per share (EPS) should rise in 2023. In fact, analysts are now pricing in a rise from 30.1p in 2022, to 32.2p in 2023, and then to 35.4p in 2024.

Provided this projection is met, it is likely that FTSE 100 stalwart will increase dividend payments. Analysts therefore forecast the company will pay a dividend of 8.6p per share in 2023, followed by 9.7p per share in 2024. This would result in forward yields of 6.1% and 6.9%.

Should I buy Barclays shares?

What’s more, Barclays shares currently have the lowest valuation multiple FTSE competition. So, it is not surprising to see brokers like JP Morgan, Citiand UBS with a ‘buy’ rating. And with an average target price of £2.40, this gives me a huge potential profit of 71% if I were to buy the shares today.

That said, it should go without saying that there are several reasons why Barclays shares are trading so cheap. This includes exposure to the US market, higher commercial real estate involvement, and a large number of litigation cases – all of which can significantly reduce profits.

However, I am of the opinion that the stock is oversold as it is trading in multiples that are currently at their lowest levels. While the bank’s exposure to risk, disruption, and litigation costs should not be discounted, neither should the bank’s long-term potential. Therefore, I will buy stocks in the long run.