Despite remaining profitable throughout the worst of the credit crunch, Barclays (LSE: BARC) (NYSE: BCS.US) has delivered a rather disappointing share price performance over the last five years. Indeed, shares in the bank are down 27% since July 2009, while the FTSE 100 has risen by over 50%. This is in spite of the fact that Barclays’ bottom line has been far stronger than that of sector peer, Lloyds, with the part state-owned bank being up 10% over the same time period.
However, the next five years could prove to be a lot more profitable for shareholders in Barclays. Here’s why.
Superb Growth Prospects
While the likes of RBS and Lloyds are only just returning to profitability, Barclays has, as mentioned, been profitable throughout recent years. Indeed, Barclays is forecast to significantly grow its bottom line in 2014 and 2015, with earnings per share (EPS) expected to increase by a mightily impressive 41% this year and 23% next year. This is above and beyond the FTSE 100 mid-single digit growth forecasts and shows that Barclays is a highly attractive growth stock.
A Top-Notch Yield
In addition to growth potential, Barclays also offers a highly attractive yield. As early as next year, Barclays is forecast to yield 5.2% at current prices. This is up there with the highest yielding shares on the FTSE 100. However, there is even more potential at Barclays, since a rapidly growing bottom line means that dividends could increase at a brisk pace. In addition, the bank is targeting a payout ratio of around 45% (meaning it hopes to pay out 45% of profit as a dividend each year). This means that dividends per share could go much higher when combined with growing profitability.
Great Value
Despite the strong income and growth prospects, Barclays continues to trade at depressed prices. This is at least partly due to recent negative headlines surrounding Barclays’ dark pool trading systems, but it means that longer-term investors have the chance to buy shares in Barclays on the cheap. For instance, it currently trades on a price to earnings (P/E) ratio of just 8.8, while a price to book value ratio of only 0.6 shows just how low its price has become.
Clearly, there could be further short-term volatility. However, for longer term investors, Barclays could be a winner and could help to pay off your mortgage.