The Legal & General (LSE: LGEN) share price has finally got its game on, up 19.5% in the last 12 months. Okay, it hasn’t suddenly turned into Nvidia, but it’s finally showing some oomph.
And of course, this growth isn’t the full story. The insurer and asset manager offers one of the biggest dividends on the FTSE 100, yielding 7.5% on a trailing basis. That lifts the total return over the last year towards 27%. I hold the stock, and I’m pleased to see it kick into life.
However, it’s still trailing the other FTSE 100 financials in my portfolio, including fellow big yielders M&G and Standard Life. They’re up 33% and 38%, respectively, in the last year.
Bumpy profits never help
So why has Legal & General taken so long to get going? Part of the problem is that its profits have been bumpy. It operates in long-term businesses such as pensions, annuities and asset management, where performance can be affected by markets, interest rates and the value of its investments. Mind you, so do M&G and Standard Life, and they’ve responded much better.
There are signs that things are changing. Legal & General’s 2025 operating profit before tax rose 5% to £2.65bn, while operating cash generation increased 8% to £1.8bn. The recent revival could still prove to be a false dawn. Legal & General shares have had plenty of ups and downs over the last decade, without ever really taking off.
Beware this calculation
There’s a problem with high-yielding shares too. When a company pays its dividend, cash leaves the business and, all else being equal, the share price falls to reflect that. That makes it harder for the shares to build momentum. Again, this hasn’t been such an issue for M&G and Standard Life.
There are some reasons for optimism. Rising demand for workplace pensions and retirement products offer a huge pool of potential customers, as does the bulk annuity market.
On the other hand, a stock market crash would hit assets under management, currently more than £1.2trn, shrinking commission-based income. So what do the experts say?
The 12 analysts offering one-year share price forecasts produce a consensus target of 271p. If correct, that would see the shares fall 7.8% from today’s 293p. That would be supremely disappointing.
The forecast dividend yield for 2026 is 7.6%, which would leave investors with a slightly negative total return of 0.2. That would reduce a £12,000 stake into £11,976 by September next year.
As if that wasn’t enough, look at this. Of the 13 analysts giving stock ratings in the past three months, most are negative:
- Strong Buy: 1
- Buy: 2
- Hold: 1
- Sell: 1
- Strong Sell: 8
It’s quite a while since I saw such a high proportion of brokers suggesting a FTSE 100 stock is a Strong Sell. Why so gloomy?
FTSE 100 underperformance fear
I can see Legal & General struggling after its recent run, and FTSE 100 financials generally could face a tougher period if markets weaken.
Income-focused investors might still consider Legal & General shares, but they need to come with a growth warning. I can see more attractive growth and income prospects on the FTSE 100 today, and I’ll pursue those instead.
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Harvey Jones owns shares in Legal & General, M&G and Standard Life.
This story originally appeared on Motley Fool
