Legal & General (LSE: LGEN) currently holds the distinction of offering the highest dividend yield in the FTSE 100, sitting at a notable 7.1%.
The financial services giant has announced a further increase to its dividend, continuing a pattern of shareholder returns that stretches back many years.
Since the 2008 financial crisis forced the company to slash its payout, there has been only one year in which Legal & General failed to grow its dividend per share.
The latest increase amounts to a modest 2% rise in the interim dividend, which is consistent with the company’s own stated policy on returns.
For long-term income investors, the more pressing question is whether that growth trajectory can be sustained over the coming years as market conditions evolve.
Capital generation for the first half, reported under the Solvency II methodology, rose 3% year on year to £790 million, providing some underlying support for the dividend commitment.
The company has emphasised that it views its capital returns programme as sustainable, reinforcing confidence among investors who rely on the stock for consistent income.
Alongside its dividend commitments, Legal & General is currently executing a £1.2 billion share buyback programme, which reduces the total number of shares in circulation.
That buyback dynamic is already having a measurable effect, with the first-half cost of paying dividends to ordinary equity shareholders falling to £886 million from £898 million in the same period last year, despite per-share growth.
The business benefits from a well-defined commercial model targeting a market with resilient long-term demand, supported by a strong brand, a large customer base, and deep financial markets expertise.
Share buybacks do carry their own questions, however, as they can signal that management lacks higher-value opportunities to deploy capital within the business itself.
There are broader risks worth considering, particularly the possibility of a market downturn that could prompt investors to withdraw money from funds faster than they contribute, weighing on profits.
Legal & General’s share price performance over the past five years has been relatively disappointing, delivering a gain of just 10% compared to the wider FTSE 100’s increase of 53% over the same period.
From a pure income perspective, however, the combination of a 7.1% yield, consistent dividend growth, and solid cash generation makes the stock a compelling candidate for investors prioritising returns over capital appreciation.