Legal & General (LSE: LGEN) currently offers the highest dividend yield in the FTSE 100, sitting at approximately 7.7%, yet City analysts remain cautious on the stock.
Despite that headline yield, many analyst firms are rating Legal & General as a Sell, reflecting expectations that its share price could decline in the near term.
The central concern surrounds the Pension Risk Transfer market, where Legal & General has built a substantial portion of its business over the past decade.
Rising competition in that market is expected to lead to slower growth and potentially lower profit margins, undermining the investment case for the insurer.
If the competitive pressure intensifies, Legal & General could be forced to reduce its dividend payments, removing the primary attraction of holding the stock.
Share price weakness would compound the problem significantly, since a 15% fall could effectively wipe out nearly two years of dividend income for investors.
In contrast, insurance rival Aviva (LSE: AV.) commands eight Buy or Strong Buy ratings from City analysts, making it a notably more popular income pick despite its lower yield of around 5.7%.
Analysts expect Aviva’s dividend payout to grow at a healthy rate, with forecasts pointing to an increase of approximately 6% this year alone.
Tobacco company Imperial Brands is another preferred alternative, carrying nine Buy or Strong Buy ratings and offering a yield of around 6.6%.
Beyond the income on offer, analysts believe Imperial Brands shares are worth approximately 35% more than the current market price, pointing to meaningful capital upside alongside the dividend.
The third stock preferred over Legal & General is LondonMetric Property, a real estate investment trust focused on logistics, convenience, entertainment and leisure, and healthcare.
LondonMetric also holds eight Buy or Strong Buy ratings, with analysts forecasting potential share price gains of around 17% in the medium term alongside its yield of approximately 6.7%.
Of the three, Aviva stands out as a particularly compelling income investment given the progress made under CEO Amanda Blanc’s transformation strategy.
Blanc has reshaped Aviva into a leaner, more streamlined business in recent years, and that work is now translating into stronger profit performance across the group.
The share price is also in a positive upward trend, which signals that the broader market views Aviva’s outlook favourably and supports the bullish analyst consensus.
One risk worth acknowledging is that any further increase in competition within the Pension Risk Transfer market could have knock-on implications for Aviva as well as Legal & General.
Nevertheless, Aviva’s combination of a growing dividend, improving profitability, and rising share price makes it a credible income option for investors seeking returns beyond what Legal & General currently offers.