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Until Ithaca Energy was promoted to the FTSE 100 in September, Legal & General (LSE:LGEN) shares were the highest-yielding on the index.
Could the pension and savings group regain the top spot soon? Let’s take a closer look at the opinion of City analysts to see what they think.
What’s been happening?
From 2021-2025, the group raised its dividend by 18.1%, equivalent to an annual average increase of 4.25%:
- 2025: 21.79p
- 2024: 21.36p
- 2023: 20.34p
- 2022: 19.37p
- 2021: 18.45p
However, over the same period, the company’s share price fell from 297.5p to 265.1p. The overall impact of these changes was to lift the stock’s yield from 6.2% to 8.2%:
- 2025: 8.2%
- 2024: 8.8%
- 2023: 8%
- 2022: 7.8%
- 2021: 6.2%
For 2026, the group’s pledged to lift its payout by 2% to 22.23p. Based on a current share price of 305p, this implies a forward yield of 7.3%.
In 2027, analysts are expecting a further increase to 22.67p. If the group’s share price remains unchanged, it means the stock’s offering a future return of 7.4%.
However, they’re predicting a cut to 21.29p in 2028. To me, this is a little surprising. If correct, it would be lower than the group’s 2024 dividend. Is this really likely for a group that last cut its payout in 2009, during the global financial crisis?
Throughout the pandemic, it was able to keep it unchanged. On this basis, a cut seems unlikely to me. Although, of course, there are never any guarantees when it comes to dividends.
But even if the analysts are right, a 7% yield’s not to be sniffed at. For example, if this was maintained — and the payouts were reinvested — it would take only 11 years for the cost of an investment made today to be recouped from dividends alone.
However, a dividend reduction — even a small one — would probably send the group’s share price lower. Investors usually react badly in these situations.
And if there was a period of global economic uncertainty, the income and gains from the group’s vast investment portfolio would fall. In turn, this could put its dividend under pressure. Similarly, increased compeition could reduce shareholder returns.
Final thoughts
It’s impossible to know whether Legal & General will regain its status as the highest-yielding stock on the FTSE 100. There are too many moving parts, including the dividends and share prices of the other 99 stocks on the index to be able to accurate predict what might happen.
However, I think there’s a good chance it will remain one of the best, at least. That’s because its pension risk transfer business is growing rapidly – it recently (27 October) announced it was taking over the management of the £2.45bn Royal Mail fund – and it has the financial muscle to withstand a sustained downturn.
It holds over twice the level of reserves required to meet its regulatory requirements. During its 190-year history, it’s survived plenty of recessions, wars, and a pandemic or two.
Impressively, earnings per share grew by 11% during the first six months of 2026, compared to the same period a year earlier.
In my opinion, Legal & General’s a well-managed business with a strong brand. In fact, it’s just one of many interesting income stocks to consider that are available today.
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James Beard owns shares in Legal & General plc.
This story originally appeared on Motley Fool
