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On 21 September, Ithaca Energy (LSE:ITH), the North Sea independent oil and gas producer, became the FTSE 100’s highest-yielding stock. However, this notable achievement didn’t come about because of a big increase in its dividend. Instead, it was due to the stock’s promotion from the FTSE 250.
It means Legal & General (LSE:LGEN) no longer retains the top spot. But the two stocks are very different.
The new kid on the block
Ithaca’s rapid rise to the elite index of listed companies (it listed in November 2022) has resulted from a series of acquisitions and soaring energy prices. And further expansion’s on the cards.
Earlier (5 October), the group announced a “transformational” deal. It plans to acquire some offshore oil assets in Canada for $860m plus up to $250m of performance-related deferred consideration.
Significantly for shareholders, the deal’s expected to be “immediately cash flow and dividend accretive”. In a dig at the British government, the press release noted the “pragmatic federal and provincial government, providing strong support for further investment and development in the basin”.
By contrast to Canada’s low-tax, pro-drilling approach, North Sea energy profits are taxed at 78%, while further development of the UK’s Rosebank oil field (in which Ithaca has a 20% interest) and the Jackdaw gas field remains in doubt.
That’s why expansion overseas is seen by the group as a way of growing its dividend. However, this is far from guaranteed. Energy prices are erratic, which explains why the group’s payout has fluctuated in its short time as a listed company.
- 2023 – 39.60 cents ($399.6m).
- 2024 – 34.04 cents ($498.4m).
- 2025 – 30.23 cents ($498.4…
For 2026, the group’s aiming for a dividend of $470m-$520m. This implies a forward yield of 7.8%-8.7% (at 10 October exchange rates).
We’re very pleased to be entering the FTSE 100, reflecting ongoing efforts of optimisation, growth and delivery of shareholder value. We welcome the opportunities our updated position unlocks, including being introduced to a new pool of potential investors…
Executive chairman Yaniv Friedman
Long in the tooth?
By contrast to Ithaca’s youthfulness, Legal & General, the pensions and savings group, was established in 1836. And it last cut its dividend during the 2008-2009 global financial crisis. Based on its expected payout for 2026 – it’s pledged a 2% increase on 2025 – it has a forward yield of 7.6%.
A threat to its dividend is increased competition. And with over £560bn of equities and bonds on its balance sheet at 30 June, a sustained economic downturn could affect its liquidity and investment income.
However, the group’s growing on the back of winning new pension schemes to manage. Also, its wealth management division is performing strongly. For the first half of 2026, group core operating earnings per share increased by 11% compared to the same period in 2025.
Final thoughts
Of the two, I suspect Legal & General’s dividend will be more reliable but I still think both could be considered by income investors.
When conditions are in its favour, Ithaca Energy’s likely to deliver stronger cash flows. During the first half of 2026, it has already generated sufficient cash from its operating activities ($955m) to cover over twice its lower annual dividend target ($470m).
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James Beard owns shares in Legal & General plc.
This story originally appeared on Motley Fool
