The forecast looks good for Barclays (LSE:BARC) and the banking giant’s stock price soared.

City analysts expect normalized profits to rise about 9% this year and nearly 18% in 2025.

However, these expected improvements come after a decline in earnings and operating cash flow in 2023. Welcome to the world of cyclical companies where earnings, cash flow, dividends and stock prices can provide investors with long-term volatility.

Mixed investment results

The cyclicality of the banking industry is the greatest risk shareholders face when investing in Barclays shares. It would be easy to plan an investment poorly and end up losing money.

But the result after investing £2,000 in stocks five years ago would have been positive. At the time the share price was around 171p and today (November 6) it is at 256p, as I write.

Therefore, the gain on the rise in shares would have been 85p per share. However, there have also been dividends to be reaped along the way. The company has paid 25.15p per share in dividends over the past five years.

This means that the total return per share was around 110.15p, or around 64%. So an investment of £2,000 would now be worth around £3,280 – not bad!

However, investors who chose to invest just a year ago will have done better with a total return of 94%. An investment of £2,000 made in November 2023 would now be worth around £3,880 – even better, and with a shorter holding period!

Cyclical investing can disrupt traditional investing assumptions. For example, holding stocks for longer periods of time can often improve an investor’s chances of achieving higher total returns. But this is not necessarily true for cyclical stocks.

For example, £2,000 invested in Barclays shares 10 years ago would have generated the worst total return of these examples. The shareholder would have received dividends worth 48.75p per share and seen the share price rise by just 20p. So that’s a measly gain of 68.75p, or just 29% – an unsatisfactory result for a 10-year commitment, I’d say.

Focused on revenue performance

In my opinion, the chances of a negative outcome are high for new shareholders because the stock price is higher. Cyclical businesses tend to fluctuate over time, which means we could see more trading volatility in the future.

However, many shareholders will likely have purchased the shares for dividends, as the company often has a high yield.

Looking ahead, Barclays announces plans to return “at least“£10 billion of capital to shareholders between 2024 and 2026. This will be done via dividends and share buybacks. The company, however, prefers buyouts.

The company expects to keep the total dividend stable at the 2023 level. “in absolute terms”with progressive growth in the dividend per share driven by the reduction in the number of shares as share buybacks occur.

Currently, the vision looking to the future dividend yield for 2025, it rises to just over 3.6%. However, this assessment seems a bit exaggerated. If banks earn at least 5%, the revenue helps compensate shareholders for the cyclical risks of owning their shares.

Therefore, I would expect more ups and downs for the stock price rather than consistent rises.