Legal & General Group sits at the top of the FTSE 100’s dividend yield rankings, making it a natural focus for investors seeking passive income.
The financial services firm currently offers a 7.7% dividend yield, the highest of any company listed in the index of leading British businesses.
At the current share price, 1,000 shares in Legal & General would cost under £3,000 and ought to generate around £218 annually in dividends before any future increases are considered.
The company has built a strong track record of dividend growth, raising its payout every year since a steep cut during the 2008 financial crisis, with just one exception during the pandemic when it held the dividend flat.
Management has made clear that growing the dividend per share annually in coming years remains a stated ambition, signalling a continued commitment to rewarding shareholders.
However, annual dividend growth has slowed from 5% to 2% in recent years, a trend that income-focused investors will want to keep firmly in mind when assessing the stock.
Legal & General operates in a segment of the financial services market that benefits from substantial long-term demand, with a large customer base and a brand reputation stretching back to prior centuries.
The business has demonstrated consistent cash generation potential over many years, which underpins the dividend and gives shareholders a degree of confidence in future payouts.
Risks remain, however, as current economic uncertainty could lead policyholders to pull funds, putting pressure on earnings and potentially threatening the dividend.
The company’s sale this year of a large US business means revenues could shrink going forward, though the transaction did provide Legal & General with a significant sum of capital.
The share price performance over the past five years underlines the income rather than growth nature of this stock, with LGEN rising just 4% compared to a 50% gain in the wider FTSE 100 index over the same period.
That gap between share price performance and index gains is a stark reminder that Legal & General is best assessed through the lens of dividend income rather than capital appreciation.
For investors building a second income stream, the combination of a market-leading yield, a long-established business model, and a management team focused on dividend growth makes LGEN a stock worth serious consideration.