In the FTSE 100, two of the highest-yielding options are Legal & General (LSE:LGEN) and Investec (LSE:INVP). The current dividend yields are 7.36% and 6.21%, respectively. Yet, if an investor only wanted to add one stock to the portfolio for second income, which is the best pick?
The case for L&G
One reason I’d consider taking Legal & General is the predictability of the business model. It is more than just a traditional insurer. It manages over £1trn of assets and generates recurring cash flows from retirement products that benefit from the UK’s ageing population.
Those factors help it to have good visibility when it comes to paying out dividends. Evidence of this can be seen from the fact we’re in the middle of a plan from management to return around £5bn to shareholders between 2025 and 2027. Core earnings per share increased by 9% in the latest full-year results, demonstrating that profits are still growing despite the company’s mature profile.
For income investors, the dividend record is equally impressive. It paid a total dividend of 21.79p per share for 2025, up from 21.36p the previous year, marking another annual increase in what has become a long track record of growing shareholder payouts. The yield is over 1% higher than Investec, and when it comes to counting the pennies, this can add up to a significant difference over time.
Growth for Investec
That said, I certainly wouldn’t dismiss Investec. In fact, there are good reasons why some investors may prefer it. The specialist bank continues to produce impressive profitability, with various areas of the business supporting the growth. The full-year results released back in March noted “ongoing client acquisition, client activity, growth in average lending portfolios, and continued net inflows” as factors helping the outperformance.
It could be argued that Investec is more of a growth stock than Legal & General, with greater opportunities to scale in the coming year, which could translate to larger increases in the dividend per share. Over the past year, the share price is up 3%, versus 18% for Legal & General.
Another plus is that Investec’s current dividends aren’t stretching the company too far. Investec lifted its total dividend to 38.5p per share for the latest financial year, while maintaining a conservative payout ratio of 46.4%. The payout ratio is the percentage of net income that is paid out to shareholders as dividends. So clearly, the dividend here is sustainable, which is a green flag.
The bottom line
Both companies do have risks. Investec has operations in South Africa, which might put some off given the potential for geopolitical tensions. As for Legal & General, changing regulation in the insurance space means it could negatively impact operations if things change in the future.
Ultimately, I think the choice between Legal & General and Investec comes down to the type of income investor. If the priority is dependable, inflation-beating dividends, consider Legal & General. But if an investor is prepared to accept a little more economic sensitivity in exchange for potentially faster earnings, Investec could prove to be the better pick for consideration.
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Jon Smith does not hold any positions in the companies mentioned.
