Barclays‘ (LSE:BARC) shares don’t have the highest yield in the FTSE 100 index. But they’re nonetheless proving popular among some income investors. And with a dividend of 8.6p per share, if I want to earn a £1,000 passive income today, I’d need to buy 11,628 of its shares.
At around 500p per share today, assembling that position would cost around £58,140. Obviously, that’s a substantial lump sum. But there’s nothing stopping investors from gradually building to that target over time.
The real question, of course, is whether this is even a good investment idea.
Is the business strong enough to sustain this?
Can Barclays maintain and potentially even expand its dividends? The most recent results suggest the answer seems to be yes. During the first quarter of 2026, total income rose 6% year-on-year to £8.2bn, with net interest income up 12% to £3.4bn, excluding the investment bank. In turn, pre-tax profits reached £2.8bn, and earnings per share grew 8% to 14.1p.
So what’s behind these impressive figures? Two powerful tailwinds are doing the heavy lifting.
First, a structural hedge. By locking in interest rates using clever financial derivatives, the bank continues to profit from an elevated net interest margin even after the Bank of England began gradually cutting rates last year.
The second factor is that UK lending volumes are growing at pace, with loans and advances up 5% year-on-year across the UK business.
Considering the generally soft economic climate, that’s a pretty encouraging signal. And it comes paired with a continued strong performance from its investment banking arm. This alone generated over £4bn of quarterly income for the first time in its history on the back of record activity in Global Markets.
Consequently, management’s committed to returning more than £15bn to shareholders between 2026 and 2028 through dividends and buybacks. In other words, dividends look like they’re on track to grow. So is this a no-brainer
What could go wrong?
There’s one significant cloud hanging over Barclays shares, and it’s the same one facing several of its UK banking peers: motor finance. The FCA’s redress scheme, which was finalised in March, has already prompted Barclays to increase its provision by £105m during the first quarter, bringing the total set aside to £430m.
The bank’s chosen not to legally challenge the rules, which seemingly reflects a desire to draw a line under the issue quickly. But with customer response rates and final compensation costs still uncertain, this liability isn’t yet fully resolved.
There’s also a broader macroeconomic risk worth watching. Barclays’ own first-quarter results were partly overshadowed by a £228m single-name impairment charge in the investment bank. While this was a one-off, it serves as a reminder that the investment banking division carries inherent volatility.
To buy or not to buy?
Barclays is a genuinely well-run business firing across all divisions, generating strong returns, and committed to returning substantial capital to shareholders over the next three years. That makes it an ideal candidate for an income portfolio, even with a modest yield and the risks the bank faces.
That’s why, for patient investors prepared to think in years rather than months, I think Barclays’ shares could be worth a closer look.
Should you invest £5,000 in Barclays Plc right now?
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Zaven Boyrazian does not hold any positions in the companies mentioned.
