In March, I declared my love for Legal & General Group (LSE: LGEN) shares. I said if I could only buy one dividend income stock on the FTSE 100, it would be this one.

Since then, its stock has fallen by 10%. Yet that reversal hasn’t tempered my enthusiasm, quite the reverse. I think now is an even better time to buy the £14.25bn insurer and asset manager. It’s 10% cheaper, after all.

There has been no bad news coming out of the company since I last wrote about it. It has simply been caught up in the wider stock market sell-off.

I’d still buy Legal & General shares

Naturally, the looming recession will hurt Legal & General. Both new and existing customers may have more pressing priorities than funding regular monthly pension, investment, and protection plan payments. 

Many may be forced to cash in investment policies, to put food on the table. Asset managers usually suffer outflows in a downturn. With inflation expected to hit double digits, the squeeze will only intensify.

Yet Legal & General remains a broadly defensive stock. Its annuities operation should benefit from rising interest rates, as this will boost rates and customer demand. Equity release sales may also grow, as pensioners struggle to live on their retirement savings. There will be positives as well as negatives, and I wouldn’t say that about every company.

The insurance sector may also be re-energised by government plans to scrap EU Solvency II regulations, as part of its post-Brexit reforms. The aim is to cut red tape and encourage insurers to invest in long-term infrastructure such as offshore wind farms. 

Bank of England Governor Andrew Bailey has called Solvency II “cumbersome”, and so far, the market response has been positive. Reform may encourage insurers to take more risks, by cutting capital reserve demands, which could make them more exciting to invest in. 

This FTSE 100 stock fights inflation

The main reason to invest in Legal & General is still the dividend (and probably always will be). It is now forecast to yield a thumping 7.9%, covered 1.7 times by earnings. That makes it a tremendous inflation hedge. While no dividend is completely safe, this is more solid than most.

Management has a good track record of hiking shareholder payouts. It did freeze the dividend at 17.57p per share in 2020, but that was during the pandemic. At least it didn’t drop its payout, in contrast to FTSE 100-listed rivals Aviva and RSA.

I think now looks like a great time to buy Legal & General, which is valued at a lowly 7.4 times earnings. Old warhorses like this one should continue to prove their worth, as recession fears grow.

I’m not expecting Legal & General shares to suddenly go on a gallop. They’ve gone nowhere slowly for five years. When the recovery finally comes, short-term investors are likely to race back to riskier stocks, but that’s fine by me.

I’ll keep my reinvesting my dividends, year after year after year. There aren’t many ways to get a rising income of almost 8% today. I like this one.

The post Legal & General shares now yield 8% and look too cheap to ignore appeared first on The Twelfth Magpie.

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• Here’s why I bought this 7.6%-yielding FTSE 100 dividend stock instead of saving in a Cash ISA
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Harvey Jones doesn't hold any of the shares mentioned in this article. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

A great FTSE 100 stock for passive income

Legal & General (LSE: LGEN) has established itself as a top dividend payer. Indeed, last year, it paid out a record 17.57p per share, and further dividend growth is expected this year. Such a large dividend equates to a yield of around 7%, cementing the insurance company as one of the top income-focused UK shares.

After excellent first-half results, I’m also confident that the dividend is sustainable. For example, in the first half of the financial year, operating profits were able to rise 14% year on year to reach £1.1bn. This was higher than its pre-pandemic levels. The Solvency Coverage Ratio, which is a key measure of financial stability for insurance companies, also reached 183%, up from 173%. As such, considering that the full-year dividend only cost the company around £1bn, there is no indication that it will be cut.

I also feel L&G will be able to avoid significant disruption from the conflict in Ukraine. For instance, its exposure to Russian securities equals just 0.1% of its assets under management. This means that the effect of the war should be limited for L&G.

There are a couple of risks, however. For instance, the company is heavily linked to the UK economy, and is likely to move in the direction of the general market. This may cause significant amounts of short-term volatility. Second, there is rising competition in the group’s various sectors, and this may strain profits.

Despite this, I think a current price of around 240p is far too cheap, and the risks are already priced in. I’ll continue to add L&G shares to my portfolio on any further weakness.

Another struggling UK share

Although National Express (LSE: NEX) is not part of the FTSE 100, instead being a constituent of the FTSE 250, it has certainly not been immune to the current bear market. Indeed, the shares are currently priced at under 200p, for the first time since September 2020. This is partly due to the rising price of oil, which is soaring due to the conflict. Along with wages, oil is the main cost for the company, and it has the potential to strain profit margins considerably.

Despite this being a risk, I also feel it has been overstated. In fact, National Express has hedged oil from 2022 to 2023, meaning that the rising oil price should not directly affect the company over the next two years. In the long term, I’m also hoping that oil will decrease in price and get closer to ‘normality’.

Further, it seems that the recovery from the pandemic has been extremely strong. For example, in the third quarter, revenue managed to reach 83% of the same period in 2019. I hope for further improvement when the full-year results are released soon. Therefore, this is a UK share that I will continue to add to my portfolio on the dip.

The post As the FTSE 100 crashes below 7,000 points, here are 2 no-brainer UK shares to buy appeared first on The Twelfth Magpie.

More reading

• How much would I need in a Stocks and Shares ISA to target £19,036 a year in second income?
• Here’s why I bought this 7.6%-yielding FTSE 100 dividend stock instead of saving in a Cash ISA
• How much would you need in a Stocks and Shares ISA to match the State Pension?
• Here’s a quick and easy way to start earning passive income this summer with a spare £1,000
• How much would I need to invest in these FTSE 100 dividend gems for a £29,061 ISA passive income?

Stuart Blair owns shares in Legal & General and National Express. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.