FTSE 100 banks have generally provided solid dividend returns, and yet, if you check Barclays‘ (LSE: BARC) stock, it might not seem that way. Instead of the expected 4% or 5%, the yield stands at a disappointing 1.83%, which trails the FTSE 100 average of about 3.1%. Compared to its blue-chip peers, Barclays lags, with Lloyds at 3.32%, HSBC at 3.65%, and NatWest leading at 4.61%.
Impressive growth among FTSE 100 stocks
The primary reason for the dip in yields is that bank stocks have soared in value over the past five years, as highlighted by the following gains:
Barclays – 162%
HSBC – 308%
Lloyds – 149%
NatWest – 211%
While these banks have gradually upped their shareholder dividends, they haven’t quite matched the rapid rise in share prices.
Barclays, in fact, has the lowest yield among the large banks. That said, the reasoning is clear: the bank is heavily focused on share buybacks. In 2025 alone, it returned £3.7bn to shareholders, with £2.5bn coming from share buybacks—far exceeding the £1.2bn distributed as dividends.
Investors stand to benefit from buybacks, too
The bank aims to return at least £10bn to shareholders from 2024 to 2026, with plans to deliver this capital “through dividends and share buybacks, with a continued preference for buybacks”. This will be followed by over £15bn between 2026 and 2028.
Lloyds reportedly returned £3.9bn in 2025, including a £1.75bn buyback, while NatWest made £4.1bn in distributions, which included £1.5bn in buybacks. HSBC executed $6bn in buybacks during the same period.
I wouldn’t say Barclays is necessarily being stingy overall; it’s just channeling more of its returns into buybacks. This could divide opinions among investors. Personally, I would rather see cash dividends hitting my trading account. That way, I can make my own decisions with it, rather than waiting for a buyback effect that takes time to materialize.
On the upside, there’s a point to be made for buybacks: when they cancel shares, each remaining shareholder ends up with a slightly larger ownership stake. Over time, this can enhance earnings and dividends per share.
Promising future for dividends
There’s another perspective on Barclays’ yield that often gets overlooked. Despite prioritizing buybacks, the yield is anticipated to rise consistently, forecasted to reach 3.15% in 2026 and 3.92% in 2027. Of course, anything can change, but the trajectory seems promising. Additionally, Barclays’ shares appear to be relatively good value right now, with a forward price-to-earnings ratio sitting at 9.2.
As with any investment, risks are definitely present. Barclays possesses a much more significant investment bank than Lloyds or NatWest, which adds a layer of volatility—especially during turbulent market conditions. There have also been concerns regarding its exposure to the shadow banking sector, especially after the recent downfall of Market Financial Solutions, which resulted in a £228m provision for Barclays in the first quarter. Plus, the global economic climate is concerning with rising oil prices and inflation.
Still, I believe Barclays’ shares are worth considering if you’re looking for growth, buybacks, and income from dividends. Those keen to optimize their income might want to explore another FTSE 100 option…
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