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Legal & General Group (LSE: LGEN) shares go ex-dividend on 24 April. As someone with a big stake in the high-yielding FTSE 100 stock, the date is marked on my calendar.
Personally, I won’t be rushing to buy more before the deadline, but only because I already hold a hefty chunk. Also, buying just before an ex-dividend date isn’t always a win. The share price typically drops by the value of the dividend on the day, so investors aren’t getting something for nothing. Still, for long-term investors looking to take a position, today may be a good time to consider buying.
As an insurer, pensions, and asset management firm, Legal & General is naturally exposed to stock market volatility. Compared to others in the sector, it’s held up tolerably well. The shares are down around 6% over the past month and about 7% year on year. Not ideal, but hardly a disaster in the current climate.
The Legal & General share price has drifted sideways for years. What makes it stand out is that mouth-watering 9.02% trailing yield, roughly double what I’d get from bonds or savings accounts. The difference is that my capital is at risk. Plus concerns over whether such a generous payout can be maintained.
Is this FTSE 100 stock a bargain today?
Full-year results in March were reassuring. The group confirmed a £500m share buyback programme for 2025, part of a wider plan to return over £5bn to shareholders across three years. That’s roughly 40% of its market cap. The trade-off is that annual dividend growth will slow from around 5% to 2%. Given the high yield, I’d be relieved if they managed that.
A few weeks ago, I’d have said the dividend looked pretty solid. Today, I’m a little more cautious. As trade wars spook markets, there’s no telling what’s next. Dividend cover is also thin at just 1.1. Another concern is that three years of sliding earnings per share have driven up the price-to-earnings ratio to a staggering 80.
Legal & General is expanding in the US. In February, it announced a £2.3bn deal with Meiji Yasuda to sell its US protection business and launch a joint venture focused on pension risk and asset management. That sparked some excitement, although today’s craziness may take the edge off it.
I can see why some investors might consider buying the recent dip. The company’s strong cash generation, robust balance sheet, and clear strategy make it one of the more comforting holds in my portfolio right now. Although, there isn’t much competition on that front at the moment!
The 16 analysts tracking the stock have a median 12-month price target of just under 266p. That’s more than 12% above today’s 237p. Add in the dividend, and the potential total return creeps above 20%. That sounds great but in this market forecasts are flimsier than ever. I’d be thrilled to get that kind of return from here.
Still, my dividend lands on 5 June, worth 15.36p for each share I own. I’ll reinvest it straight back into Legal & General. And I’ll continue doing that every six months for years — decades if I’m lucky. I’m crossing my fingers that one day, the share price springs into life too.
This story originally appeared on Motley Fool
