Down 8% in a month and yielding 9%! Is the Legal & General share price a no-brainer buy?

The Legal & General (LSE: LGEN) share price is a bit of a letdown. Over the last 12 months it’s up just 4%. Over the same period, the FTSE 100 grew almost 12%, roughly three times as much.

The asset manager and insurer has risen 32% over five years, but still trails the UK blue-chip index, which grew almost 60%. Share price growth isn’t everything when it comes to investing, especially in a stock that comes with a king-size trailing yield of 9.3%. But it would be nice to see some action.

Reinvesting dividends for growth

I actually received my latest payout today (26 September). I got 6.12p for each of the 2,096 shares I hold, which handed me just over £128. Reinvested, that should buy me another 54 shares, lifting my total to 2,150. The final 2025 payment next June should be bigger, at around 15.87p per share. That would add another £341 to my tally and lift my 12-month passive income total to £470.

Generating regular dividends and reinvesting them like this is a powerful way to building long-term wealth. But I still want that growth. Investors in FTSE 100 rival Aviva got that pleasure. Its shares have climbed 36% over one year and 150% over five.

Legal & General’s first-half results on 6 August looked encouraging, with core operating profits rose 6% to £859m, and IFRS pre-tax profits jumped 28% to £406m. The joy was short-lived though. Just a week later, JP Morgan downgraded the stock to Neutral from Overweight citing valuation pressures, volatile investment returns, and rising competition in the pension risk transfer market.

I’m a little concerned to see the dividend is covered just once by earnings. Ideally, it should be closer to two. Even so, management remains committed to returning more than £5bn to shareholders over three years through dividends and share buybacks.

The balance sheet looked steady, with a solvency ratio of 217% and net debt down to £3.39bn from £4.71bn. So, I’m inclined to think the income is secure, but these things are never guaranteed.

Volatile revenues and profits

As my table shows, revenues, profits, and earnings per share (EPS) have all been very bumpy lately. Which goes a long way to explaining recent underperformance.

Legal & General’s price-to-earnings ratio is eye-watering at around 80, but the forward P/E is a far more palatable 12.8, dropping to 8.8 in 2026. Forecasts suggest the stock will yield 9.44% by then, which is an enticing prospect. Analyst consensus points to a 12-month target of 262p, some 10.5% higher than today’s price. Factor in the yield and the total return could approach 20% but, again, no guarantees.

The group is still crying out for the kind of overhaul Aviva has enjoyed under CEO Amanda Blanc. A £20bn company with more than £1trn of assets under management shouldn’t be left to drift indefinitely.

I wouldn’t call it a no-brainer buy but with the shares dropping 8% in the last month, I think it’s well worth considering for income-focused investors willing to take the long-term view.