Here’s why Legal & General’s one of the FTSE 100’s ‘best’ dividend shares!

Exactly what makes the ‘greatest’ FTSE 100 dividend share is open to interpretation. For me, the answer’s clear: Legal & General (LSE:LGEN), whose shares represent the single largest holding in my passive income portfolio.

Some companies such as BAE Systems and British American Tobacco have longer records of unbroken dividend growth. Dividends here have risen every year for more than 20 years.

Others, including Coca-Cola HBC and London Stock Exchange Group have long records of payouts growing by double-digit percentages. For these FTSE 100 stocks, annual dividends have risen by 11.6% and 15.5% respectively over the last five years.

Yet for me, Legal & General remains THE standout dividend share on the Footsie. It’s not just what the firm’s delivered in the past. I believe it will remain a formidable passive income provider long into the future.

Strong record

Legal & General doesn’t have an unblemished record of dividend growth. Like hundreds of UK stocks, cash rewards were impacted by economic uncertainty caused by the pandimic crisis in 2020. Back then the business froze the annual dividend.

Yet the company’s overall track record remains extremely impressive. Dividends have risen in 13 of the last 14 years. And over the last decade they’ve risen at an annual rate of 4.6%, providing investors with a passive income that’s kept up with inflation.

That’s all nice, I’m sure you’d agree. But what really sets Legal & General shares apart as a dividend stock are the size of the company’s yields. This has averaged 7.2% over the last decade, sailing above the FTSE 100 long-term average of 3%-4%.

But what’s next?

Past performance isn’t always a reliable guide to the future however. And Legal & General faces significant threats to profits and dividends looking ahead. These range from rising competition and regulatory changes, while in the nearer term payouts could be impacted by rising inflation and its effect on financial services demand.

On the downside, Legal & General has been raising dividends at a lower rate of 2% since 2024. This is set to continue until next year as the company rebalances its capital allocation policy, putting greater emphasis on share buybacks.

Yet this policy also has advantages. It reinforces long-term dividend sustainability, and gives the firm more cash to invest in high-growth and capital-light businesses, which should support dividends beyond 2027.

In the meantime, Legal & General’s current approach means dividend yields remain substantial. In fact, they’re the highest on the FTSE 100. These sit at:

• 7.5% for 2026.
• 7.6% for next year.
• 7.8% for 2028.

Are Legal & General shares a Buy?

As you can see, analysts expect Legal & General to keep raising dividends. But rumours of a cut have persisted, fuelled by the firm’s declining capital ratio.

As a shareholder, I’m not fearful that a cut’s around the corner. Though declining in recent quarter’s, the FTSE firm’s Solvency II ratio remains above 200%, more than double what regulators require. Its growing investment in capital-light businesses should further strengthen the balance sheet.

Legal & General’s share price has risen an impressive 25% over the last year, outpacing the broader FTSE 100. I’m optimistic this can continue as the wealth management and life insurance industries rapidly grow. This should also support dividend growth for years to come, making it a top stock to consider.

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Royston Wild owns shares in Legal & General and Coca-Cola HBC.