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I had a bit of a splurge on Legal & General (LSE: LGEN) shares last year, buying them in April, July and August. So far, they’ve had a patchy run.
Over the last 12 months, the Legal & General share price has fallen 1.4%. That’s well behind average growth of 10.21% across the FTSE 100 as a whole. Meh.
The market may have been a little harsh. While first-half profits, published on 7 August, climbed just 1% to £849, they still beat analyst forecasts of £834m.
One of the best dividends on the FTSE 100
L&G has growth opportunities too, as it expands its US presence by investing $200m in high growth real estate sectors. Back home, it’s picking up business in the bulk annuity market. Obviously, it faces tight competition on both fronts.
The personal annuity market’s been booming, with sales doubling to £1.2bn as higher interest rates boost demand. There’s a risk this could reverse once rates fall.
A Santa Rally and a 2025 bull market would boost the value of L&G’s net assets and investment inflows. Yet its shares dipped 0.68% yesterday (6 November) despite hopes that we might get a good run under President Trump.
I’m guessing that’s down to the rising yield on bonds, as markets anticipate higher inflation. That means investors can get a higher rate of income without chancing their capital on dividend stocks like this one.
Legal & General shares may idle for some time yet, but I still don’t regret buying them. The main reason I did is because it’s a high-yield dividend supremo.
Today, it boasts a thunderous trailing yield of 9.29%. It’s a happy day when the L&G dividends hit my investment account, which has happened three times now. Sadly, I have to wait until 5 June for the next one.
I’m hoping for high and rising income
While my online portfolio shows my shares have fallen 2.77% since I bought them, with dividends re-invested I’m actually up 12%. If those dividends continue to rise, I’ll double my money in less than eight years, even if the share price doesn’t shift at all. I’ll do even better if it does rise (of course, it might fall!).
Today, I hold a modest 1,980 shares, bought at an average price of 226p. Of these, 201 were bought with reinvested dividends, just over 10% of the total. Not bad, given that I’ve held the stock for less than 18 months.
The forecast dividend per share for 2024 is 21.3p per share, up 4.8% on last year. Growth will slow from there. By 2026, it’s expected to have edged up to 22.4p. That’s a modest 5.16% growth over two years but will give me a bumper 9.9% yield, based on my original purchase price.
If I bought more at today’s lower price of 219p, I’d bag a 10.22% yield! So that’s what I’ll do, as soon as I have the cash.
Dividends aren’t guaranteed. Legal & General will be forced to cut shareholder payouts if it doesn’t generate enough cash to fund them. Yet if L&G sticks with it, I’ll get a brilliant, growing yield. Especially based on what I originally paid.
If the shares grow too, I’ll treat that as a bonus.
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