Legal & General (LSE: LGEN) has the biggest forecast dividend yield on the FTSE 100, at 7.25%. It’s on a lowly price-to-earnings (P/E) valuation too, of just 8.7. So why aren’t UK investors snapping it up?
Well, actually, they are. Legal & General was one of the most heavily bought stocks of the month, again, last month. And that’s across several popular trading platforms. So, should investors consider buying before the price gets too high?
Not quite a no-brainer?
It could be a big mistake to buy solely based on the current year’s expected dividend and on a stock’s recent popularity. And looking at forecasts, I do have a couple of concerns.
One is that forecast earnings for 2026 look like a bit of a one-off following a relatively tough spell. Analysts don’t expect it to be replicated over next two years, though they do see a steady upwards trend on the longer-term horizon. But it means we could be looking at a P/E of 13 in 2027 and 12 in 2028.
Is that a bit high? It might be, for a stock in an industry that has a long track record of ups and downs. But then, for such a high dividend, I think it’s a premium worth considering paying.
What does the competition offer?
Legal & General isn’t the only one in its sector offering a decent payout. Here’s how it stands among the top five FTSE 100 insurance stocks ranked by dividend yield…
| Stock | P/E 2026 | Yield 2026 | Yield 2027 | Yield 2028 |
| Legal & General | 8.7 | 7.25% | 7.51% | 7.70% |
| Standard Life | 16.2 | 6.10% | 6.46% | 6.76% |
| Aviva | 13.6 | 5.67% | 6.42% | 6.88% |
| Admiral | 14.6 | 4.21% | 5.18% | 5.68% |
| Hiscox | 15 | 2.06% | 3.22% | 3.36% |
So Legal & General comes top in P/E terms too. However, they all do converge a bit over the next two years of forecasts.
And this is a short-term snapshot. Investors really need to be in this sector, possibly more than any other, for the long term.
With that in mind, Legal & General and Aviva are my top two personal choices. And I’d almost certainly have bought Legal & General if I didn’t already own Aviva. I skip over Standard Life — previously known as Phoenix Group Holdings — as I’m a bit unsure of the future of its closed-book life insurance business.
Dividend reliability
The biggest weakness for Legal & General for me comes from management’s newest policy of raising its dividend by just 2% per year. That, and a volatile share price history, could turn income investors away and perhaps lead to price weakness. We’re definitely still looking at economic threats here too.
But is only 2% dividend growth per year so bad? It should be in line with long-term UK inflation, once the Bank of England gets it down to target levels. And an effectively inflation-linked 7.25% per year looks good to me.
Popularity among UK investors has pushed the share price up in 2026. But I still rate Legal & General as one of the best FTSE 100 income stocks to consider today. And there’s another I have my eye on right now too…
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Alan Oscroft owns shares in Aviva.
This story originally appeared on Motley Fool
