There’s been a growing trend among UK investors in 2026 — Stocks and Shares ISA buys have been rising. And with recent reforms making Cash ISAs less attractive, that trend could continue.
Where have they been investing this new money? A fair bit has been going into high-yield dividend stocks. And Legal & General (LSE: LGEN), with a forecast 7.3% dividend yield, is high on ISA providers’ lists of top 2026 buys. That’s for a number of key reasons…
Growing capital returns
Legal & General has a healthy record of providing long-term passive income. And we UK investors just love to reinvest that income in more shares, don’t we? The compounding effect means we can aim to build our ISAs up to towering sums over the long term.
Back in 2006, Legal & General paid 5.55p per share in dividends. It rose to 21.79p per share for the 2025 full year, and analysts have 22p pencilled in for 2026. That’s an almost-four-fold annual income rise over 20 years!
That period covers the 2008 banking crash, when Legal & General slashed its dividend by more than a third over two years. And it includes the Covid years too — but all that happened was the 2020 dividend was held flat.
I think that really shows the potential cash-generative power of a stock like this held for the long term.
There’s more…
And that’s only the dividends. With 2025 results, the company announced a £1.2bn share buyback — its biggest ever. It’s part of plans to return more than £5bn to shareholders between 2025 and 2027.
Buybacks help grow the per-share dividend, as the same cash is spread across fewer shares. And we saw above how brilliant Legal & General has been with dividend growth.
Will we get another big buyback announcement this year? Full-year results are due on 4 August, so we’ll know soon enough. That date is underlined on my calendar — and maybe it should be on everyone else’s too?
Passive income
Passive income almost seems like money for nothing, doesn’t it? But there are no free lunches round here, and Legal & General comes with its own risks.
In 2025, the company’s Solvency II coverage ratio fell. It still came in at a healthy 210%. But that’s down from 232% in 2024 — partly due to paying out those big capital returns. We don’t have a specific forecast for 2026, but management expects a medium-term operating range of 160% to 190%.
Is that a real worry? Maybe not. But it could restrict the potential for future dividend rises. And any unforeseen downturn — in what is, after all, a cyclical industry — might even mean a dividend cut. Cuts don’t happen often, but 2008’s was a big one.
Bottom line
I love the insurance and investment business personally, although I definitely see it as needing a long-term horizon. And I’d almost certainly hold Legal & General if I didn’t already have enough Aviva shares.
I rate Legal & General as a top candidate to consider for a diversified Stocks and Shares ISA, as part of a carefully selected few…
Should you invest £5,000 in Legal & General Group Plc right now?
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Alan Oscroft owns shares in Aviva.
