Even with the FTSE 100 near record highs, there are still plenty of impressive dividend shares on offer. And right now, one stock sits above all others when it comes to yield.
Legal & General (LSE:LGEN) currently has the highest payout in the entire index, at 7.7%. For context, a £5,000 investment today would instantly lock in £385 of annual passive income overnight.
So should I be rushing to buy? Well, it’s a little complicated, so let’s break it down.
A business built for the long term
As a quick reminder, Legal & General’s one of the UK’s largest financial services groups, operating across three core divisions: Institutional Retirement, Retail, and Asset Management.
The 2025 full-year results were genuinely impressive. Core operating profit rose 6% to £1.62bn while core earnings per share (EPS) grew 9% to 20.93p, hitting the top end of management’s own guidance range.
This then paved the way to a welcome 2% added to dividends, which reached 21.79p per share and pushed the already impressive yield even higher. And to top things off, management also launched the largest share buyback in the company’s history, at £1.2bn.
In total, £2.4bn is planned to be returned to shareholders over the next 12 months. And that’s a compelling package that triggered a fresh Buy recommendation from analysts at Goldman Sachs.
So far, this is sounding like a no-brainer. But this is where things get a little complicated.
Is the yield too good to be true?
Despite the strong results, the share price actually fell 6% on results day. And since then, the wider analyst community has remained divided. Morgan Stanley and Citi both rate the stock as a Hold, while Jefferies downgraded to Sell in May with a 185p target – roughly 34% lower than where the shares are trading today.
The core concern is solvency. Its Solvency II coverage ratio fell from 232% in 2024 to 210% in 2025, as the company deployed capital aggressively through its buybacks and investing in the pension risk transfer market.
While 210% remains comfortably above regulatory requirements, the direction of travel has raised eyebrows among more cautious analysts. And if capital buffers continue to suffer as feared, Legal & General’s ability to continue paying such a generous dividend could come under significant pressure in the medium-to-long term.
To buy, or not to buy?
Legal & General’s not a straightforward income stock. The yield’s real, the cash generation’s genuine, and the pension risk transfer franchise is one of the most durable businesses in UK financial services.
But the falling solvency ratio, a divided analyst community, and targets below today’s price all suggest this dividend share deserves careful scrutiny before hitting the Buy button.
Personally, I think this business definitely deserves a closer look. But there’s no denying the dividend looks riskier than today’s figures might suggest.
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.
