Legal & General (LSE: LGEN) shares have been struggling the past five years, falling behind peers M&G and Aviva.
Over that period, M&G’s delivered roughly 137% total return and Aviva around 224%, while Legal & General has managed about 70%. The reason? A mix of macro headwinds, property exposure, and investor rotation into faster-growing rivals.
Five-year total return chart (approximate):
- M&G – 137%
- Aviva – 224%
- Legal & General – 70%
Yet for income hunters, it still offers the best yield on the FTSE 100 at 7.5%. Both M&G and Aviva are below 6%. Moreover, the suppressed price means it now looks heavily undervalued, with a forward price-to-earnings (P/E) ratio of just 12.4.
So is it simply taking a while to catch up with its peers? If so, locking in that high yield at this price point could deliver outsized returns for shareholders.
But before making any decisions, it’s important to look at what’s holding the price back and if its latest results support future growth.
Solid results (with a few exceptions)
Legal & General published its FY2025 results on 11 March. The headlines looked reassuring, but beneath them lay a few concerns that explain the subdued share price.
Key points from the results:
| Core operating profit | £1.62bn | Up 6% year on year |
| Assets under management | £1.2trn | With strong growth in index and private markets |
| Core operating EPS | 20.93p | Up 9%, in line with prior guidance |
| Solvency II capital generation | £1.5bn | Up 5%, with a pro forma coverage ratio of 210% |
| Final dividend | 21.79p | A 2% increase from 2024 |
| Share buybacks | £1.2bn | Supported by sale of US protection business |
On paper, that’s a resilient business. But investors are focusing on the slower dividend growth, the heavy reliance on buybacks, and ongoing uncertainty around property valuations.
Is the market being overly cautious? I think so, most likely because L&G’s exceptional historical performance has led to overzealous expectations.
So what’s the verdict?
There are two main risks that can’t be ignored:
- The AI bubble risk: Legal & General’s been a beneficiary of strong equity markets, partly driven by AI-related tech stocks. If that bubble bursts, it could hurt investment returns and asset valuations.
- High interest rates impacting property values: the group’s significant exposure to commercial property means sustained high rates could pressure valuations and rental income.
For investors, these risks translate into potential volatility and slower capital growth. But the buffer’s substantial: diversified income streams, a strong capital position, and a disciplined approach to shareholder returns.
Final thoughts
Legal & General has survived many ups and downs, so I’m optimistic about a recovery. With the high yield, even moderate growth would equate to significant total returns.
Is it the best time to buy? At The Twelfth Magpie, we focus on investing with a 10-20-year outlook. Over that time scale, there’s no benefit in trying to catch highs or lows – but by slowly accumulating shares over time, it all evens out in the end.
With that in mind, I think now’s as good a time as any to consider a solid, reliable dividend gem like Legal & General.
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Mark Hartley owns shares in Legal & General and Aviva.
