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.

Should you invest £5,000 in Investec Group right now?

When investing expert Mark Rogers and his team have a stock tip, it can pay to listen. After all, the flagship Twelfth Magpie Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.

And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Investec Group made the list?

Jon Smith does not hold any positions in the companies mentioned.

The post Legal & General vs Investec: which is the best stock for second income? appeared first on The Twelfth Magpie.

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?

When investing expert Mark Rogers and his team have a stock tip, it can pay to listen. After all, the flagship Twelfth Magpie Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.

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?

Alan Oscroft owns shares in Aviva.

The post This dividend stock has a 7.3% yield, and Stocks and Shares ISA investors are buying! appeared first on The Twelfth Magpie.

So how big does an ISA actually need to be to generate £2,000 a month (£24,000 a year)?

How much money do you need?

Following the well-known 4% withdrawal rule, a Stocks and Shares ISA would need to be worth around £600,000 to produce £24,000 annually. Needless to say, that’s a pretty large chunk of change. And sadly, most people won’t have that sort of money just lying around.

Luckily, you might not need it. Instead of using the 4% rule to generate a passive income, investors can build a portfolio focused on generating a higher yield through dividends. And if filled with quality income stocks with generous payouts, the required size of an ISA can shrink drastically.

For example, if a portfolio generates a 7.5% yield each year, earning £24,000 would only need an ISA worth £320,000 – almost half.

Obviously, that’s still a serious amount of money. But by investing each month consistently and reinvesting dividends along the way, even a modest investor can get there over time.

The real challenge is finding a genuinely reliable 7.5% yield in the first place. So could Legal & General (LSE:LGEN) shares be the answer?

A 7.5% yield from a FTSE 100 stalwart

As a quick reminder, Legal & General’s one of the UK’s largest and most diversified financial services groups, managing over £1.2trn in assets across pension risk transfer, retail annuities, asset management, and workplace pensions for millions of customers.

That sort of business generates a lot of cash. And right now, management’s using that cash to reward shareholders with an impressive 7.5% payout.

So can it be trusted? Let’s look at the latest numbers.

In 2025, Legal & General delivered core operating profit growth of 6% to £1,623m, with earnings per share growing 9% to 20.93p. The Solvency II operational surplus (a key metric that measures how much cash Legal & General has to spare for dividends) grew 5% to £1.5bn, with the company’s coverage ratio sitting at a healthy 210%.

In other words, the business is looking quite solid at the moment.

But no investment is ever without risk. A 210% Solvency II coverage ratio’s impressive, but has slipped from 232%, driven down in part by cash being paid out to shareholders. And management’s warned it could fall further to anywhere between 160% and 190%.

Alone, that’s not a major problem. However, if it continues to deteriorate further, then it could be an early warning sign that today’s 7.5% yield might be unsustainable in the long run. Even more so considering client net outflows in its Asset Management arm continue to apply pressure to management fee income.

So what should investors make of all this?

The bottom line

For investors targeting the equivalent of a £2,000 monthly passive income, I think Legal & General shares are worth a closer look. There’s no denying the business has risks and headwinds to overcome. But with a long track record and prudent leadership at the helm, those risks might be worth taking.

Should you invest £5,000 in Legal & General Group Plc right now?

When investing expert Mark Rogers and his team have a stock tip, it can pay to listen. After all, the flagship Twelfth Magpie Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.

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.

The post How much do you need in an ISA to earn £2,000 monthly passive income? appeared first on The Twelfth Magpie.

Dividend shares can be a lucrative source of passive income

Specifically, is it possible for someone to replace the income they earn with passive income from dividends paid by shares they own?

The short answer is yes, it can be. But there is a lot more to it than that!

Dividends can be lucrative. But even a share with a dividend yield of 6% — double the current FTSE 100 average – only pays its owner £6 per year for every £100 they invest. That presumes the dividends last, which is never guaranteed.

So trying to replace their current income (whatever it is) with dividends would mean investing over 16 times as much.

Replacing an income, over time

While, for most people this may be no overnight way to retire early, that does not mean the idea has no merit.

With some patience and a long-term approach, it could help someone bring their retirement forward.

For example, let me use the Office for National Statistics’ May data for the average weekly total earnings, of £749. That weekly number adds up to £38,948 per year.

To earn that in dividends from a stock market portfolio yielding an average 6% would require it to be worth a little over £649k.

That is a lot. But say someone puts in £1,000 per month and initially compounds the portfolio at 6% per annum, only taking the dividends out as cash once the portfolio hits the target size.

Doing that would take 25 years. That sounds like a long time. But it means that someone starting from scratch today with this approach could target replacing their income entirely with dividends by the time they are 60.

That is quite a few years ahead of the current State Pension age.

Getting going can be simple

With larger contributions, things could be speeded up.

A higher yield could also help and may be possible, but double the FTSE 100 average is already ambitious in my view when sticking to well-known proven businesses.

Of course, to do this requires some way to buy shares. That can be simple to set up, whether it is a share-dealing account, Stocks and Shares ISA or trading app.

Could this share help hit the target?

One income share I think is worth considering in this context is Legal & General (LSE: LGEN).

With its 7.5% dividend yield, the financial services firm is more lucrative than any other company in the FTSE 100.

Not only that, but it aims to keep growing its dividend per share each year, as it has done the past few years.

But the share price’s 10% growth in the past five years badly lags the 47% achieved by the wider FTSE 100. That points to some of the risks facing this share, such as the sale of a big US business this year, meaning revenues and profits could fall.

Still, Legal & General has proven its strong cash generation potential. It has a large customer base and I also like its focus on the pensions and retirement savings market, where demand is resilient.

What income stock do we like better than Legal & General Group Plc right now?

One of our Share Advisor analysts has just released a brand new stock report that we think is a must-read for any investor looking to try and generate potential income.

And the best bit is that you can see if for yourself, right now, absolutely free of charge!

No jargon. No hard sell. Just a clear look at an income share we think is worth your time.

Christopher Ruane does not hold any positions in the companies mentioned.

The post Can someone put money in the stock market, quit work, and live off the passive income instead? appeared first on The Twelfth Magpie.

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:

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.

Should you invest £5,000 in Legal & General Group Plc right now?

When investing expert Mark Rogers and his team have a stock tip, it can pay to listen. After all, the flagship Twelfth Magpie Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.

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?

Mark Hartley owns shares in Legal & General and Aviva.

The post With a 7.5% yield and P/E of just 12.4, is now the best time to buy Legal & General shares? appeared first on The Twelfth Magpie.

Here’s an amazing example to consider…

Who?

Financial services group Legal & General (LSE:LGEN) has been around since 1836. I’m not sure when it started paying a dividend but it’s now the highest-yielding stock on the FTSE 100.

Based on amounts paid over the past 12 months, it means a £10,000 investment today could produce income of £750 over the next year. Use this cash to buy more shares and dividends of £806 could be unlocked in the second year. Repeat this process for 10 years and the £10,000 lump sum would be worth £20,610.

This is a powerful reminder of the benefits of compounding.

Investing for the long term. Our future depends on it.

L&G website

And a look at recent history reveals that the group has an impressive dividend track record. Over the past five years, it’s increased its payout by 18.1% in cash terms:

• 2025 – 21.79p
• 2024 – 21.36p
• 2023 – 20.34p
• 2022 – 19.37p
• 2021 – 18.45p

In fact, you have to go back to 2009 and the global financial crisis to find the last time it was cut. And there’s one aspect of the group’s business that could underpin further significant growth: the pension risk transfer (PRT) market.

Reducing risk

In the late 1990s/early 2000s, many defined benefit pension schemes moved into deficit due to a combination of increasing life expectancy, the dotcom market crash, and falling interest rates.

But with companies increasing their contributions to help improve the financial position of their schemes, things started to slowly improve. By 2022, post-pandemic increases in interest rates and gilt yields helped reduce the value of scheme liabilities. In many cases, this moved the funds from an overall deficit into a surplus.

Nowadays, this represents a significant opportunity for Legal & General as an increasing number of pension trustees are looking to take advantage of the improved financial position and offload their schemes to third-party providers.

Indeed, it’s a big market. In 2025, there were 350 UK PRT transactions involving around £40bn of benefits. Legal & General’s the market leader and secured £11.8bn in 2025, including £4.6bn from Ford. The group remains on course to meet its target of writing £50bn-£65bn of new business from 2024 to 2028.

My view

Of course, there are no guarantees this strategy will be successful. And the group’s dividend could come under threat. With £1.2trn of assets under management, it’s vulnerable to global stock and bond market uncertainty. Also, competition in the sector’s fierce.

Despite these threats, I still think Legal & General’s a stock to consider. It has over 12m customers across its savings, retirement, and life insurance businesses, which gives it significant scale and financial firepower. At 31 December 2025, the group held more than twice the level of reserves that it’s obliged to have.

As well as helping its PRT division, higher interest rates have also made annuities increasingly attractive to pensioners. The group remains the largest provider in the UK.

In fact, it’s one of many exciting UK stocks that I have in my own portfolio.

What income stock do we like better than Legal & General Group Plc right now?

One of our Share Advisor analysts has just released a brand new stock report that we think is a must-read for any investor looking to try and generate potential income.

And the best bit is that you can see if for yourself, right now, absolutely free of charge!

No jargon. No hard sell. Just a clear look at an income share we think is worth your time.

James Beard owns shares in Legal & General plc.

The post This income stock could turn £10,000 into £20,610 within 10 years appeared first on The Twelfth Magpie.

What is passive income?

Passive income is unearned — in other words, it comes from activities other than paid work. For example, popular forms include:

1. Savings interest from cash deposits held at banks or building societies — safe but boring, perhaps?

2. Rental income from letting out property (being a buy-to-let landlord) — too much hassle for me.

3. Interest from government and corporate bonds — not risk-free, but less risky than owning shares. (We invest in bonds through low-risk money-market funds.)

4. State and company pensions — only accessible to people over, say, 55 years old.

5. Share dividends — a riskier way of generating income, but my favourite by far.

What are share dividends?

When companies make profits, they can use these in many ways. Some firms invest in their future growth, while others make acquisitions by buying or merging with other companies. Some businesses use their excess cash to buy back their shares, thus reducing their share base to enrich the remaining shareholders.

As a fan of ‘free money’, I really like when corporations return their excess cash to shareholders as dividends. Typically, these cash distributions are made quarterly, six-monthly, or yearly. However, most listed companies don’t pay dividends, sometimes because they are loss-making.

Another hiccup is that future dividends are not guaranteed. Hence, they can be cut or cancelled at short notice. When times get hard, these cash payouts can be scrapped, as happened repeatedly during the Covid-19 crisis of 2020/21.

Delicious dividends

One FTSE 100 share my family portfolio owns for its powerful passive income is Legal & General Group (LSE: LGEN) — known as L&G (or ‘the Striped Umbrella’ after its colourful logo). We bought our stock around four years ago at 247p a share.

Founded in a London coffee shop in 1836, this 190-year-old business is one of the UK’s largest money managers. Today, it looks after £1.2trn of assets across three divisions: Institutional Retirement, Asset Management, and Retail.

As I write, L&G shares stand at 291.2p, valuing this group at £16.1bn. At this level, they offer a dividend yield of 7.5% a year — far more than any savings account — but also riskier, right? For me, that’s a generous reward for owning part of this great British business.

Meanwhile, our stake has increased in value by 17.9%, which is an added bonus. However, this is only a paper gain, as I intend to own this stock for the long term. Also, we reinvest all dividends by buying more shares.

Finally, as a global asset manager, L&G’s health is closely connected to capital markets. When the next big recession or stock-market crash arrives, the company’s revenues, earnings, and cash flow could tumble. Even so, we will hold tight and keep reinvesting our juicy dividends into buying yet more L&G shares.

Here’s another exciting income stock investors are keen on!

What income stock do we like better than Legal & General Group Plc right now?

One of our Share Advisor analysts has just released a brand new stock report that we think is a must-read for any investor looking to try and generate potential income.

And the best bit is that you can see if for yourself, right now, absolutely free of charge!

No jargon. No hard sell. Just a clear look at an income share we think is worth your time.

Cliff D’Arcy has an economic interest in Legal & General Group shares.

The post This FTSE 100 share pays passive income of 7.5% a year! appeared first on The Twelfth Magpie.

Three years ago, I went on a FTSE 100 high-yield dividend stock buying spree. I felt that lots of dividend-paying UK blue-chips looked unmissable value. Many were trading on price-to-earnings (P/E) ratios of as low as six or seven, while yielding anything between 5% and 10%. Yet investors seemed wary. The shares lagged. I felt like I was taking a chance, but dived in anyway.

What do these FTSE 100 stocks offer?

I went big on FTSE 100 financials, where the best value and most promising dividends seemed to lie. As well as Legal & General, I bought Lloyds Banking Group, wealth manager M&G and insurer Standard Life (then called Phoenix Group). The last three have flown, handing me bags of share price growth and dividend income.

My total return on Lloyds in three years is around 175%. M&G has delivered around 105%, and Standard Life almost 90%. When I compare that to my likely return from cash (around 12%), I shudder. My retirement would have been much poorer if I’d left my money in a savings account.

Dig up these companies’ share price performance figures and you might think I’ve got my numbers wrong. The shares haven’t risen as high as my total return:

My figures include reinvested dividends. And with M&G and Standard Life both yielding almost 10% when I bought them, they’ve really jacked up the total return. I plan to hold these stocks for 10, 20 or 30 years. There will be plenty of bumps along the way, but hopefully my wealth will continue to compound and grow nicely.

Why is this income king struggling?

So what about Legal & General? It shares are up just 16.5% and 27.4% over one and three years. While the board is working hard to streamline the business and find new sources of income, pre-tax profits have been sluggish:

• 2025 – £1.62bn
• 2024 – £1.62bn
• 2023 – £1.67bn
• 2022 – £2.52bn
• 2021 – £2.27bn

The big 2023 drop was partly down to higher interest rates reducing the valuation of physical property and alternative assets held by the group, which hit fee income. With interest rate rates potentially rising again, this remains a threat.

Today, Legal & General offers the biggest trailing yield on the entire FTSE 100 at 7.7%. I was pleased to discover that my reinvested dividends have lifted my total three-year return to 55%. Which is pretty good. It’s just that the others are a lot better.

I’m hoping the shares will play catch-up, but as ever, there are no guarantees. Markets remain bumpy, and if the AI bubble bursts, Legal & General could give up its modest gains. But I still think it’s worth considering for long-term investors seeking income. With luck, we’ll get a spot of growth too.

Should you invest £5,000 in Legal & General Group Plc right now?

When investing expert Mark Rogers and his team have a stock tip, it can pay to listen. After all, the flagship Twelfth Magpie Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.

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?

Harvey Jones owns shares in Legal & General Group, Lloyds Banking Group, M&G and Standard Life.

The post Why ultra-high-yielding Legal & General shares are even better than I thought! appeared first on The Twelfth Magpie.

It is exempt from income and capital gains tax but also it allows withdrawals at any point, unlike private pensions. As from 6 April next year though, savers under 65 will face a 22% tax charge on interest earned from uninvested cash held within the ISA.

Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.

Nevertheless, insurance and investment giant Legal & General (LSE: LGEN) continues to offer one of the most generous, well‑covered dividends in the index. And this is backed by robust cash generation, a capital‑light business model, and a progressive dividend policy aimed at increasing returns.

So, what sort of income am I targeting here?

What does the dividend policy mean for returns?

Legal & General’s progressive dividend policy is designed to increase payouts along with growth in earnings per share. But if there is a dip in earnings, the dividend is not automatically cut — it is held steady instead.

Since 2021, it has generated respective average annual dividend yields of 6.2%, 7.8%, 8.1%, 9.3%, and 8.3%. The variation in returns despite rising payouts underlines dividend yields can go down and up alongside changes in share price.

However, all these returns are way higher than the current FTSE 100 average of 3.1% and the FTSE 250’s 3.4%.

What are the forecasts?

Analysts project the firm’s dividend yield will rise to 7.8% this year, 8% next year, and 8.2% in 2028.

In income terms, the forecast 8.2% as an average would generate £25,284 in dividends on a £20,000 holding after 10 years. This also incorporates dividend compounding being used to turbocharge those dividend returns over time.

After 30 years on the same basis, the dividends would jump to £212,146. Including the initial £20,000 stake, the holding’s total value would be £232,146 by then.

And that would pay a yearly income of £19,036!

What about share price gains too?

Historically, share prices tend to converge to their ‘fair value’ over time. And the best way I have found of identifying this value is discounted cash flow (DCF) analysis.

This works by forecasting a company’s future cash generation and converting it into today’s value. When those forecasts are less certain, the discount rate applied increases. Consequently, different assumptions here can cause varied outcomes in analysts’ DCF modelling.

My DCF analysis — including an 11.6% discount rate — shows Legal & General is 55% undervalued at its current £2.86 price.

That puts fair value around £6.36 — more than twice the present level.

So, if share prices do continue to trend to fair value, and the DCF modelling holds good (which are not guaranteed), then the £20,000 holding would be worth £44,475.

My investment view

Ultimately, share price gains and dividend rises are driven by sustained increases in a company’s earnings.

A risk for Legal & General is a sharp downturn in financial markets that could squeeze fee income. Another is tighter regulatory capital rules that could reduce free cash flow.

Nonetheless, analysts forecast the firm’s earnings will grow at a very robust annual average of 14.6% over the medium term at minimum.

Given this, I will buy more of the shares very soon. And I also have my eye on similarly deeply undervalued stocks with high yields in other sectors too.

Should you invest £5,000 in Legal & General Group Plc right now?

When investing expert Mark Rogers and his team have a stock tip, it can pay to listen. After all, the flagship Twelfth Magpie Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.

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?

Simon Watkins owns shares in Legal & General.

The post How much would I need in a Stocks and Shares ISA to target £19,036 a year in second income? appeared first on The Twelfth Magpie.

And it’s not just me saying that. The Treasury agrees. That’s why it’s planning to cut the Cash ISA allowance for the under-65s from £20,000 to just £12,000 next April. The Stocks and Shares ISA allowance will remain at £20k for all. Why is it doing that? To encourage more people to access the long-term wealth building capacity of stock markets.

Do equities really outperform cash?

Over the last decade, the average Cash ISA paid just 1.21% a year, financial website Unbiased says. By comparison, the average annual return on a Stocks and Shares ISA, with dividends reinvested, was 9.64%.

So £20,000 saved in the average Cash ISA would be worth £20,242 after one year. In the average Stocks and Shares ISA, it would grow to £21,928. That’s £1,686 more. I’ll admit that’s a slightly daft comparison. Over such a short time scale, the Stocks and Shares ISA could go anywhere. It could easily rise or fall by up to 20% or more. Cash won’t.

That short-term volatility is a price worth paying given the long-term wealth building firepower that shares bring to the table. Over the typical investment lifetime of 30 years or more, the difference is massive.

Given the above performance figures, the Cash ISA would turn £20,000 into £28,690. But the Stocks and Shares ISA would absolutely transform it into £316,301.

A popular way to invest is to buy a spread of FTSE 100 stocks, which offer both share price growth and dividend income. Insurer and asset manager Legal & General Group (LSE: LGEN) now offers the highest trailing yield on the entire blue-chip index, a stunning 7.6%. Any share price growth is on top of that. I bought it for my SIPP three years ago.

Do Legal & General shares have growth potential too?

Those dividends should ideally be reinvested while you’re of working age, to build your position, then drawn as income in retirement to top up your State Pension and any other savings you may have.

That dividend income should rise over time, which will help to protect its value against inflation. Over the last 15 years, Legal & General has increased its dividends by an average rate of 10.7% a year. This isn’t guaranteed though. The company has to generate enough cash to do that.

Sadly, Legal & General shares have disappointed lately. In fact, they trade at similar levels to a decade to go. But there are signs of a pick-up. Over the last year the shares have grown 12.7%. Combined with that trailing yield, the total one-year return is more than 20%.

Legal & General operates in a tough and competitive market. If we suffered a wider stock market crash, that could hit the value of the £1.2trn worth of assets it holds, reducing fee income. No stock is without risk. Yet I think the ultra-high income and the prospect of a share price recovery makes it worth considering today.

Should you invest £5,000 in Legal & General Group Plc right now?

When investing expert Mark Rogers and his team have a stock tip, it can pay to listen. After all, the flagship Twelfth Magpie Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.

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?

Harvey Jones owns shares in Legal & General Group.

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