A £10,000 investment in Legal & General (LSE:LGEN) shares made 12 months ago would today be worth around £11,050. That’s based on a 10.5% share price gain. Add in around £900 in dividends received over the same period, and the total return climbs to nearly £12,000. That’s a respectable 20% gain in uncertain markets.
Outperforming since ‘Liberation Day’
There have been moments of volatility over the past year. The most severe being the share price movements after 3 April — following Trump’s ‘Liberation Day’ trade policy announcements. The stock dipped like everything else in the market, and then surged in the days after, presumably as investors saw it as an area of relative safety.
Legal & General’s apparent immunity from the tariff-driven turmoil stems from its business model. Unlike manufacturers or retailers, it has minimal direct exposure to global supply chains or cross-border goods flows. Its revenues are largely derived from domestic pension schemes, insurance contracts, and asset management — all sectors that are less sensitive to trade barriers.
Results impress
Legal & General’s interim results released in August also provided a boost. For the six months ended 30 June, the group reported a 6% rise in core operating profits to £859m, while IFRS pre-tax profits surged 28% to £406m.
Growth was driven by the Institutional Retirement division, where over £5bn of new business was written. The firm also noted an improved solvency ratio of 217% and a sharp reduction in net debt, from £4.71bn to £3.39bn.
Retail operations remained resilient, with workplace pension assets topping £100bn and operating profits rising 3% to £237m. While operating profit in the asset management unit dipped to £202m, the division delivered £15m in annualised net new revenue and improved margins.
An interim dividend of 6.12p was declared, up 2%. This marks a continuation of L&G’s progressive policy. Chief executive António Simões said the group was “firmly on track” to meet its financial targets and reiterated plans to return over £5bn to shareholders through dividends and buybacks over three years.
Not all rosy
However, despite recent outperformance and strong performance in H1, some analysts have turned cautious. On 13 August, JP Morgan Cazenove downgraded the stock to Neutral from Overweight, citing limited scope for upgrades, weaker free cash flow coverage of distributions, and growing competition in the UK pension risk transfer (PRT) market.
RBC Capital Markets also reiterated its Underperform rating. Analysts raised concerns around persistency, IFRS balance sheet pressures, and softening earnings outlooks in both asset management and retail.
Still, Legal & General will continue to appeal to large investor groups. It has a robust income profile, capital strength, and exposure to long-term demographic trends. It’s also an industry with relatively limited exposure to disruptive technologies.
As I write, Legal & General’s actually trading bang on its price target. So investors probably shouldn’t expect much in the way of share price appreciation, although the dividend forecast indicates a yield rising towards 9%.
Personally, I’m not adding Legal & General to my portfolio. However, it may be a better fit to consider for some dividend-focused investors.
