Dividend shares are one of the most powerful tools any UK investor has at their disposal. And one that’s far too often overlooked. Rather than waiting years to sell a stock for a profit, dividends deliver real cash, paid straight into a brokerage account, simply for holding shares.
And the best part? Unlike a savings account, the income has the potential to grow substantially.
But which dividend shares are worth considering today?
The power of a high-yield holding
Let’s look at a concrete example. A £5,000 investment spread across the FTSE 100 index, yielding around 3.1%, would generate roughly £155 of annual passive income. Decent. But far from life-changing.
Now consider Legal & General Group (LSE:LGEN). At today’s yield of 8.07%, that same £5,000 investment generates £403.50 a year. That’s more than 2.6 times as much income from the identical sum of money.
But what makes this particularly exciting is consistency. Legal & General has increased its dividend every single year since 2009 with the sole exception of 2020, when the pandemic forced a temporary pause in the hiking streak. And management’s already guided for another 2% dividend increase in 2026, alongside its largest-ever £1.2bn share buyback programme.
In other words, that £403.50 could quietly grow larger every single year without investors needing to lift a finger.
What’s on the horizon?
The 2025 full-year results were genuinely impressive. Core operating profit rose 6% to £1,623m, core earnings per share (EPS) climbed 9%, and the Solvency II capital generation jumped 5% to £1.5bn.
Put simply, the business is firing on all fronts, generating steadily-rising consistent cash flows while also maintaining strong balance sheet health.
Digging a bit deeper, the group’s Institutional Retirement division wrote £11.8bn of global pension risk transfer business, the Asset Management segment’s assets under management reached £1.2trn, and Retail Workplace defined contribution assets surged 21% to £114bn.
CEO António Simões described L&G as a “sharper, more focused business”, well-positioned to capitalise on the structural, growing demand for long-term investments and retirement income.
However, it isn’t without risk
Despite its seemingly sturdy cash flows, Legal & General isn’t immune to macroeconomic headwinds. As a major insurer and asset manager, its balance sheet is sensitive to interest rate movements and equity market volatility.
A sharp reversal in either could pressure the all-important Solvency II coverage ratio and weigh on future capital return plans.
There’s also the question of the share price. While the dividends have been lucrative, Legal & General’s share price has actually underperformed the broader market in recent years. And this has resulted in lingering scepticism about growth from investors on top of the macroeconomic uncertainty.
So what should investors make of all this?
The bottom line
Personally, I think the combination of an 8% yield, consistent dividend growth, and a record share buyback puts Legal & General among the more compelling dividend shares to explore right now.
While I’ve already got sufficient exposure to the financial sector in my income portfolio, patient investors looking to secure a chunky passive income and diversify at the same time may want to consider taking a closer look.
Should you invest £5,000 in Legal & General Group Plc right now?
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And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Legal & General Group Plc made the list?
Zaven Boyrazian does not hold any positions in the companies mentioned.
