Forget a cash ISA! Barclays is a FTSE 100 dividend stock that could grow your savings much faster

Barclays plc (LON: BARC) appears to offer stronger income investing potential than the FTSE 100 (INDEXFTSE: UKX) and a cash ISA.

| 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.

With inflation rising to 2.7% in August, dividend shares could become increasingly attractive to investors. Fortunately, the FTSE 100 contains a number of companies which could offer higher income returns than a cash ISA. In fact, the index itself offers a dividend yield of around 4%, which is significantly higher than the rates which can be achieved on a cash ISA.

While Barclays (LSE: BARC) may not appear to be a strong income stock owing to its low dividend last year, a rise in shareholder payouts is expected in the next couple of years. As a result, it may be worth buying alongside another income share which reported robust performance on Wednesday.

Resilient performance

The company in question is pub operator Marston’s (LSE: MARS). The company’s trading update for the financial year to 29 September 2018 highlighted its strong performance despite weak consumer confidence. Turnover increased by 15% to over £1.1bn, while total pub sales increased by 3.2%. Like-for-like (LFL) sales growth was 0.6%, and it was up by 1.6% in the last 10 weeks.

Should you invest £1,000 in Barclays 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 Barclays made the list?

See the 6 stocks

The company anticipates that it will report underlying profit before tax of around £104m, which is up on the previous year’s figure of £100.1m. It was a strong year for its Taverns and Beer businesses, with its balanced portfolio helping to maximise the trading opportunities presented by the World Cup and good summer weather.

Looking ahead, Marston’s expects to see further progress from its dining pubs in the 2019 financial year. It is forecast to grow its net profit by around 4%, which could help to support its 7.7% dividend yield. Since dividends are covered almost twice by profit, its income investing potential appears to be appealing.

Dividend growth

As mentioned, Barclays is expected to report a rise in dividends over the next couple of years. The restructuring which has taken place under its current CEO seems to have created a stronger business which is better able to distribute capital to shareholders.

As a result of this, the company’s dividends per share are forecast to rise at an annualised rate of 63% in the next two financial years. This puts the company’s shares on a forward dividend yield of around 4.6%. And, since dividends are due to be covered 2.9 times by profit in 2019, there seems to be scope for them to move higher at a faster pace than profit growth over the medium term.

Of course, the banking sector continues to face risks. Brexit and the potential for a full-scale trade war could hold back investor sentiment to some degree. But with Barclays forecast to post a rise in earnings of 12% next year, its financial outlook seems to be improving. Alongside the operational performance which is being delivered under its current strategy, this could make the stock appealing for the long run. Over time, it could become an increasingly enticing dividend share which helps investors to overcome the threat of higher inflation.

5 stocks for trying to build wealth after 50

The cost of living crisis shows no signs of slowing… the conflict in the Middle East and Ukraine shows no sign of resolution, while the global economy could be teetering on the brink of recession.

Whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be a daunting prospect during such unprecedented times. Yet despite the stock market’s recent gains, we think many shares still trade at a discount to their true value.

Fortunately, The Motley Fool UK analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global upheaval…

We’re sharing the names in a special FREE investing report that you can download today. We believe these stocks could be a great fit for any well-diversified portfolio with the goal of building wealth in your 50’s.

Claim your free copy now

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.

Peter Stephens owns shares of Barclays. The Motley Fool UK has recommended Barclays. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Investing Articles

As gold hits $3,000, this FTSE 100 stock is primed for blast off

As Western institutions scramble to get as much gold as they can lay their hands on, Andrew Mackie believes this…

Read more »

British Isles on nautical map
Investing Articles

1 FTSE 100 stock I’ve been buying this week

The S&P 500 might be falling, but Stephen Wright has been taking advantage of an opportunity in a FTSE 100…

Read more »

Investing Articles

How to optimise an ISA and target a £2k monthly second income

Mark Hartley considers the potential benefits of various ISA products and outlines a strategy that could lead to a lucrative…

Read more »

Buffett at the BRK AGM
Investing Articles

How Warren Buffett continues to make the cash register ring like church bells!

I've been reading Warren Buffett’s latest letter to Berkshire Hathaway shareholders. As ever, it contains some great advice.

Read more »

Investing Articles

3 growth stocks for investors to add to their watchlists

When things get choppy in the stock market, share prices can fall dramatically. And this can be especially true of…

Read more »

The flag of the United States of America flying in front of the Capitol building
Investing Articles

5 US stocks making investors richer in 2025!

These five US stocks have doubled investors’ money in just 12 months! But can these gains continue throughout the rest…

Read more »

Frustrated young white male looking disconsolate while sat on his sofa holding a beer
Investing Articles

These 5 UK shares have made most investors poorer… for now

In the last six months, these five UK shares have crippled investment portfolios with losses of 40%-68%! But are these…

Read more »

Investing Articles

3 tempting growth stocks to consider before the Stocks and Shares ISA deadline

I’m looking to make the most of this year’s Stocks and Shares ISA allowance before the 5 April deadline. Here…

Read more »