The FTSE 100 bank said it will pay the equivalent of 5p per share comprising a 1p dividend with the rest made up by a £700mln share buyback.
Analysts had been expected a bigger proportion for the dividend element, but the total size of the payment is £100mln larger than predicted.
In a statement, the bank said it understands the importance of delivering attractive total cash returns to shareholders.
Barclays added that group profits for the year to end December 2020 fell by 30% to £3.07bn after more than doubled bad debt provisions of £4.86bn that included £1.4bn for PPI.
Total income increased to £21.8bn with commercial and investment bank income up 22%, offset by a decline in credit cards of 22% and a 14% fall at Barclays UK,
In the final quarter, group profits dopped 44% to £646mln reflecting lower profits at Barclaycard, investment banking and higher head office costs.
Jes Staley, chief executive, said underlying profits had been stable over the year but impairment charges to reflect its cautious view of the impact of the pandemic totalled £4.8bn.
The fourth-quarter impairment charge of £500mln was down 19% from the previous quarter, he noted.
"Our CC&P [Barclaycard] business made a loss before tax of £388mln for the full year due to impairment charges, despite returning to profit in the third and fourth quarters."
Barclays UK profit before tax, excluding litigation and conduct, decreased 78% to £578mln, including £278mln in the fourth quarter, reflecting the impact of the COVID-19 pandemic driving higher impairment, he added.