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When I routinely screen the FTSE 100 index for undervalued shares, one stock keeps popping up. Barclays (LSE: BARC) shares appear to be among the cheapest in the London market, but perhaps that’s for good reason?
The stock goes nowhere
On Friday, the Blue Eagle bank’s shares closed at 156.76p, which values the group at £24.4bn. That’s 22.4% above the stock’s 52-week low of 128.12p. This bottom came on 20 March, shortly after three mid-sized US banks failed.
Just 12 days before, the share price hit its 2023 peak of 198.86p. In other words, the bank’s shares plunged by 35.6% in under two weeks. Wow.
Incredibly, Barclays shares are at the same level today as they were in mid-November 2008, when the world was in the throes of the financial crisis of 2007-09. Here’s how this stock has performed over eight different timescales:
| 1 week | -0.1% |
| 1 month | +2.3% |
| 3 months | -8.7% |
| 6 months | 0.0% |
| 1 year | -7.3% |
| 2 years | -15.9% |
| 3 years | +31.2% |
| 5 years | -20.5% |
My table shows that Barclays shares have only produced positive returns over one month and three years. But remember that share prices were in the doldrums in mid-2020, due to the Covid-19 crisis.
Over one year, the stock is down more than 7%, while it has lost more than a fifth of its value over five years. Then again, these figures exclude cash dividends, which significantly boost the returns of longer-term shareholders.
What if I’d bought in 2018?
For the record, my wife bought Barclays stock for our family portfolio in early July last year. But what if we’d bought £1,000 worth of the shares exactly five years ago?
My table shows that £1k invested in the bank half a decade ago would be worth just £794.80 today. And what about those cash dividends I mentioned earlier? These are the yearly per-share dividends paid by Barclays over the past five years:
| Year ending | 31/12/2022 | 31/12/2021 | 31/12/2020 | 31/12/2019 | 31/12/2018 |
| Total dividend | 7.25p | 6p | 1p | – | 6.5p |
In 2020, Barclays and other leading British banks cancelled their dividends in order to shore up their balance sheets during the Coronavirus calamity. Nevertheless, the stock has delivered total dividends of 20.75p a share over the past half-decade.
£1,000 invested in the shares back then would have bought 500 shares at £2 each. Thus, the total dividends received by this holding would be 500 times 20.75p, which comes to £103.75.
Hence, I finally have an answer to my question. A grand invested into this share five years ago would be worth £794.80 plus £103.75 today, which totals £898.55.
Therefore, I’d have lost £101.45 (-10.1%) of my investment by buying the shares. Over the same period, the FTSE 100 is down less than 1%, excluding dividends. In summary, this widely held stock has been a Footsie laggard and loser since June 2018!
Given that the Barclays shares look undervalued to me, plus I am drawn to their near-5% dividend, I would gladly buy more stock today. If I had any spare cash, that is!
