FTSE 100 stalwart
Legal & General is one of the UK’s leading providers of life assurance, savings and investment services. Founded in 1836, it has a long and favourable track record.
As I write, shares in Legal & General are trading for 274p per share. This time last year, shares were trading for 198p per share. This equates to a 38% increase over the past 12 months. Since the turn of the year, however, things have been much more stable in terms of LGEN’s share price. On the first day of January, shares were trading for 2,66p per share. The share price has been between 250p per share to 280p per share consistently this year.
LGEN’s share price was over the 300p per share mark before the market crash struck and most of the FTSE 100 index was affected. I can see shares reaching these levels once more.
2 reasons I like Legal & General
There are many reasons I like LGEN but I have pinpointed the two that stick out for me personally.
- Legal & General has solid financials and a good history of performance too. In its half-year report released last month for example, it showed just that. LGEN’s operating profit rose by 14% compared to the same period last year to £1.07bn. Capital generation amounted to £2.3bn and cumulative cash was a mammoth £2.4bn. This will allow LGEN to not only make investments in large yielding projects for its investors and clients, it will also allow it to return some to its shareholders.
- Legal & General has a juicy dividend yield of over 6%, which is very enticing. Due to the strong financials and growth I mentioned earlier, LGEN has committed to an interim dividend of 5.18p per share. This is a 5% increase from 2020 levels. Furthermore, it is looking to pay out dividends of approximately £5.6bn–£5.9bn by 2024. Declared dividends for 2020 were £1.04bn. It is worth bearing in mind the FTSE 100 average dividend yield is 3%. LGEN’s is double that. Any shares that make me a passive income as part of my portfolio make me a happy investor.
Risk and reward
Like any stock, Legal & General does come with risks. One of the primary risks I see is competition. The likes of Aviva and RSA Insurance Group are some of its direct competitors. These competitors are snapping at the heels looking to take away market share. This could affect profit levels and any dividend payout. Next, the financial services industry is very heavily regulated. It is also at the mercy of taxation changes and other economic factors. Any of these factors, and some of them can combine at times, could affect financials and profitability.
Overall, I believe Legal & General is one of the best FTSE 100 stocks out there. With £1,000 to invest right now, I think it would be a good addition to my portfolio.
Jabran Khan has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
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