There are lots of reasons to like Legal & General (LSE: LGEN) shares. There are reasons to be disappointed in them too, but I’ll come to those in a moment. Let’s start with the outstanding positive: this is the most generous dividend stock on the entire FTSE 100.
Today, it has a blockbuster trailing yield of 8.12%. Better still, I think it’s likely to be sustainable. Legal & General has a solid balance sheet, with a Solvency II coverage ratio of 210%. In March, the board felt confident enough to unleash its biggest ever share buyback, worth £1.2bn in total. Including buybacks and dividends, it will pay shareholders more than £5bn over the three years to 2027.
Can the income keep flowing?
The board aims to increase shareholder payouts by 2% a year in future. That’s a little disappointing, as in the previous four years they’d risen 5% a year. Although given the high yield, it’s defensible.
Legal & General’s long-term dividend track record is strong. It’s increased dividends every year this millennium, apart from cuts either side of the financial crisis in 2008 and 2009, and a freeze in the pandemic year of 2020.
Half of the FTSE 100 either cut, suspended, or cancelled their dividends in due to Covid in 2020. Legal & General deserves kudos for resisting government pressure to do likewise. It paid investors 17.57p per share, the same as in 2019. It’s serious about its dividends.
Yesterday, the final 2025 dividend of 15.67p per share hit my Self-Invested Personal Pension (SIPP.) Starting in 2023, I’ve bought 2,151 shares under my own steam. I’ve since added another 370 by reinvesting the six dividends Legal & General has paid me so far.
Yesterday (4June), it paid me the seventh, worth a meaty £395. That’ll bag me around 145 shares, once my trading account automatically reinvests the money. In the autumn, they’ll pay me dividends too. That way, my income will compound and grow.
Will this FTSE 100 stock ever grow?
I’d like some share price growth on top but I’m sorry to say Legal & General has flopped on this front. Its shares trade at similar levels to a decade ago. That’s hugely disappointing.
The board’s been restructuring and streamlining the business, but we’ve yet to see the impact on the bottom line, as recent pre-tax profits show:
- 2025 – £1.623bn.
- 2024 – £1.616bn.
- 2023 – £1.667bn.
- 2022 – £2.517bn.
- 2021 – £2.265bn.
Legal & General needs to raise its game but may struggle given current economic uncertainty. Rising inflation is a threat because it could drive up via bond yields, giving income-seeking investors a better return without risking their capital. I suspect the shares will idle for a while longer.
I think the stock’s worth considering for income seekers, but I really want to see some growth. It would give me another reason to like this stock. Happily, other stocks in my portfolio are delivering both income and growth.
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Harvey Jones owns shares in Legal & General.
