[ad_1]
Image source: Getty Images
Legal & General Group (LSE: LGEN) boasts the highest dividend yield on the FTSE 100. It’s forecast to pay income of 7.48% in 2026. For investors who want to generate the highest possible income, it looks seriously tempting. But it’s not quite a total no-brainer, because the shares have been sluggish for years.
Plenty of UK financials have delivered both income and growth lately, including M&G and Standard Life. I added all three to my Self-Invested Personal Pension (SIPP) in 2023.
As my table shows, Legal & General is the clear laggard where the share price is concerned.
| Forward yield | 1-year growth | 3-year growth | |
| Aviva | 6.0% | 8.3% | 70.9% |
| Legal & General | 7.48% | 16.3% | 31.2% |
| M&G | 6.1% | 36.7% | 77.5% |
| Standard Life | 6.2% | 40.1 % | 64.8% |
When I bought them, all three paid income of more than 9%. Their yields have since been whittled down by the rising share prices but are still pretty juicy. I don’t own Aviva (sadly) but included it in my table to show what I think Legal & General should be doing.
Why is the Legal & General yield so high?
The main reason Legal & General still has the biggest forward yield is that its shares have trailed. What’s gone wrong?
Ultimately, share price performance tends to follow profits. As my quick list shows, they’ve been volatile.
- 2025 – £1.62bn
- 2024 – £1.71bn
- 2023 – £1.67bn
- 2022 – £2.52bn
- 2021 – £2.62bn
Insurance and asset managment is a tough market, and Legal & General has lost out in the battle for new business. As profits idle, some have questioned whether shareholder payouts are sustainable. Worryingly, the Solvency II coverage ratio, which shows financial strength and ability to absorb losses, slipped last year.
- 2025 – 203%
- 2024 – 232%
- 2023 – 224%
- 2022 – 236%
- 2021 – 187%
Dividend cover is low at 1.23. However, figures from AJ Bell suggest that Legal & General generates roughly 23% more capital from its ongoing operations than it distributes to shareholders, which offers some comfort.
Can this FTSE 100 stock play catch up?
Investors have also been concerned by the board’s decision to reduce future dividend growth to just 2% a year from full-year 2025. That follows four years of 5% growth following the pandemic.
That’s disappointing but I’m working on the assumption that the dividend will be more sustainable. Legal & General was able to unleash a record £1.2bn share buyback in March, and that partly explains the Solvency II dip.
Legal & General is driving through a corporate overhaul in a bid to boost synergies and profits. Let’s hope it’s a successful as Aviva. The wider economy is a threat, as the Iran war drags on, inflation menaces and markets fret over the potential AI bubble. On the other hand, US tech uncertainty may remind investors of the charms of dividend-paying UK blue-chips like this one.
If I was a school teacher, I would mark Legal & General ‘could do better’. But I’m sticking with it, hoping it enjoys a cyclical upturn at some point, as Aviva did. Worth considering for the income but the board needs to whip up some profit growth and sharpish!
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, M&G and Standard Life.
[ad_2]
Source link