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Passive income stocks have dominated the Stocks and Shares ISA popularity lists all year. And one of the country’s long-term favourites, Legal & General (LSE: LGEN), continues to stand out.
It made the top-10 lists for the big ISA providers again in September. Dividend yields on the FTSE 100 have been falling back a bit as share prices have risen. But Legal & General still offers one of the biggest, with a forecast 7.4%.
FTSE 100 cash cow
When it comes to providing shareholders with a steady cash stream, this is one that’s hard to beat. The company has maintained or raised its annual dividend every year so far this century.
Even in 2020, when regulators were urging dividend caution in the face of the pandemic, Legal & General kept it steady. And it’s increased the annual payout every year since then. The company currently has a policy of targeting 2% dividend growth a year — in line with the Bank of England’s long-term inflation target.
There’s a share buyback programme too, which should boost the value of future per-share measures. When first-half results were released in August, we heard the company had completed around £450m of its planned £1.2bn.
More than the yield
Seeking passive income stocks, we need to look beyond the current yield. And we’ve already seen the long-term nature of Legal & General’s policies.
If we only focused on today’s dividends, Ithaca Energy, one of the newest FTSE 100 entrants, might look a more appealing candidate. There’s a whopping 11.5% on the cards, even with the share price already up 70% since the start of the year.
But that comes on the back of an erratic dividend history. And analysts expect the annual payout to decline by 2028. I’m not suggesting Ithaca won’t reward investors over the long term. It’s just that when I look for ‘buy and forget’ stocks, it doesn’t really figure.
On the other hand, the cyclical nature of Legal & General’s business does mean we could see a fair bit of share price volatility in the coming years. And the price is perhaps a bit high at the moment. It’s one to consider for the long-term only, I’d say.
More passive income stocks
Building a passive income portfolio from scratch today, which others might I look at? I do like Greencoat UK Wind, which I’ve investigated before — but I still haven’t bought yet.
I already have some Lloyds Banking Group shares, and I definitely intend to keep those, though the 3.75% dividend isn’t such an attraction these days. Still, that’s for the best of reasons — the Lloyds share price is up 140% in the past five years. Starting again, I might be more tempted by the 5.1% on offer from Barclays.
For diversification away from finance stocks, the 6.7% forecast from Imperial Brands has to make it a candidate. In fact, I reckon all the stocks I’ve mentioned here are worth considering by long-term passive income investors, each with its own risks.
Oh, and there’s one more I really do like the look of, providing even further diversification…
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Alan Oscroft owns shares in Lloyds Banking Group.
This story originally appeared on Motley Fool
