£5,000 invested in Legal & General shares 5 years ago is now worth…

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Legal & General (LSE: LGEN) shares have had a disappointing five years. They’ve fallen 5.7% in the time, from 279p on 15 April 2021 to 263p today. That’s a poor showing over a fairly lengthy period. If an investor had put £5,000 into the shares five years ago, they’d be worth £4,715 today. That’s a capital loss of £285. 

Over the same timespan, the FTSE 100 as a whole climbed 51%. Which makes Legal & General look even worse. Yet there’s one consolation. Legal & General is a terrific dividend stock. Today, it boasts the highest trailing yield of the entire FTSE 100, at 8.3%. Does that compensate for that capital loss?

FTSE 100 dividend sums

Now let’s say our £5k investor ploughed every dividend they received back into Legal & General shares. What would they have now?

It’s a complex calculation, so I fed some figures into ChatGPT, and I hope it’s not having one of its regular hallucinations. But the chatbot reckons our investor would have £6,887. So despite the share price drop, they’re sitting on a total return of 38%. Which is a lot better, but still badly trails the FTSE 100 (which at a guess returned almost 70% with dividends reinvested).

So much for past performance. Is the FTSE 100 asset manager and insurer worth considering today?

The question has been on my mind for some time, since I added it to my Self-Invested Personal Pension three years ago. I was seduced by the high yield, and being honest, it’s underperformance too. Investing is often cyclical, and I hoped to bag the stock at a bargain price, then benefit when it swung back into favour.

The Legal & General share price is actually up 12.5% over the last year, so things are starting to look up. There’s a long way to go though.

Generous share buyback

It’s still making money. In full-year 2025, the board posted a 6% increase in core operating profits to £1.62bn. Sadly, that felt just short of expectations, with markets anticipating £1.65bn. It was still enough to fund a £1.2bn share buyback, the group’s biggest ever. In total, the board will return more than £5bn between 2025 and 2027. This suggests that big dividend is sustainable, although we can expect it to rise by just a modest 2% a year from here.

Management is still battling to tidy up a big sprawling business, while seeking out new growth opportunities. If the Iran crisis intensifies, and markets fall, that will hit Legal & General, which has £1.2trn of assets under management. The oil price spike looks set to keep interest rates higher for longer. That will hand investors a higher rate of income from risk-free asset classes such as cash and bonds.

I still think Legal & General is worth considering for income-focused investors. However, they should also check out FTSE 100 rival Aviva. It has a lower trailing yield at 6.2%, but its shares are up an impressive 55% over the last five years.

The post £5,000 invested in Legal & General shares 5 years ago is now worth… appeared first on The Motley Fool UK.

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Harvey Jones has positions in Legal & General Group Plc. 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.

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