Here’s why Legal & General is still one of the UK’s most popular SIPP buys

[ad_1]

happy senior couple using a laptop in their living room to look at their financial budgets

Image source: Getty Images

A FTSE 100 stock with a huge 8.2% forecast dividend and a lowly forward price-to-earnings (P/E) of only 8.2 could be ideal to hold in a SIPP for retirement, right?

Those figures describe Legal & General (LSE: LGEN). And it’s been one of the most popular UK SIPP and ISA buys over the past few months.

Should you buy Legal & General Group Plc shares today?

Before you decide, please take a moment to review this report first. Despite ongoing uncertainties from US tariffs to global conflicts, Mark Rogers and his team believe many UK shares still trade at substantial discounts, offering savvy investors plenty of potential opportunities to learn about.

That’s why this could be an ideal time to secure this valuable research – Mark’s analysts have scoured the markets to reveal 5 of his favourite long-term ‘Buys’. Please, don’t make any big decisions before seeing them.

Legal & General was one of the most bought stocks at interactive investor — owned by Aberdeen — in April. And that continued into May. It’s also been a top pick at AJ Bell all year so far. On both platforms, it’s vied for investors’ cash with the likes of Rolls-Royce Holdings and Lloyds Banking Group.

SIPP investors are aiming to build up a decent bit of retirement income. And a cash-generating, high-dividend, stock like this can potentially help toward that goal.

Those annual dividends need to be reinvested every year to maximise returns. But it’s surprising just how much difference compounding can make. The following table shows how £500 a month invested in Legal & General shares might grow over different timescales.

Monthly investment Annual return Time Total
£500 8.2% 10 years £91,600
£500 8.2% 20 years £239,050
£500 8.2% 30 years £736,087
£500 8.2% 40 years £1,710,432

Now, I’d never suggest putting all your money in one stock. That’s just asking for trouble if it, or its sector, has a tough time. And no company can guarantee its dividend. But diversification can provide some important safety to help with both those concerns.

And, of course, different investors can afford to put away different regular amounts. But I think that table shows the magic that time can conjure, however much you can manage to invest for your old age.

And isn’t it stunning the way starting 10 years earlier could add nearly a million pounds to the pot?

What to do now?

Here’s one of the key risks. Forecasts show Legal & General’s earnings per share falling back a bit in the next few years. And it could push the P/E up to 11.5 by 2027. That might look fine by long-term FTSE 100 averages. But the insurance sector has a very cyclical history. And what might look cheap for other businesses might not be here.

Still, analysts do expect the dividend to keep rising — modestly, but steadily.

If I invested for the short term, I very much doubt I’d touch any stock in this sector. Fortunately, I’m a long-term investor and always have been. But there’s still risk, I’d say mainly from economic cycles, with a company like this.

So will I buy Legal & General shares? No, but only because I already hold Aviva — and one FTSE 100 insurer is enough for me right now. If I didn’t hold Aviva, would I consider Legal & General? Definitely. Should SIPP investors consider it? I reckon they could do a lot worse.

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 and Lloyds Banking Group.

[ad_2]

Source link

Leave a Reply