Legal & General Group plc isn’t the only Neil Woodford dividend stock I’d buy

Royston Wild looks at two terrific Neil Woodford stocks that could make you rich, including Legal & General Group plc (LON: LGEN).

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Those seeking brilliant investor returns in the years ahead need to pay close attention to Legal & General Group (LSE: LGEN).

The Footsie insurance giant is a favoured pick of fund manager Neil Woodford. It is placed second and third in terms of weighting in his Income Focus Fund and Equity Income Fund respectively, comprising a juicy 5.94% and 5.07% of each fund’s total (as of the end of January).

It isn’t hard to see why Woodford is backing Legal & General either. As I pointed out last time, the company continues to make splendid progress on both sides of the Atlantic on the back of helpful demographics, i.e. rapidly-ageing populations, in both the US and UK. These sympathetic conditions helped the Footsie firm note in December that its pipeline for pension risk transfer in these markets “is the largest it has ever been.”

Juicy yields

It has forged a reputation as a go-to pick for those seeking chunky dividend growth. And City forecasters are expecting the business, helped by a 15% earnings improvement, to have lifted the dividend again in 2017, to 15.3p.

They are predicting another rise to 16.2p in the current period too, even though earnings are expected to drop 5% year-on-year. Steps to improve the balance sheet saw the insurance leviathan’s solvency II surplus improve by £1bn during January-June, to £6.7bn, giving it the wiggle room to ride out any near-term profits turbulence and to keep hiking shareholder payments.

Consequently investors can bask in a monster 6.2% dividend yield.

The good news for income seekers does not end there either. Legal & General is expected to raise the dividend again in 2019, to 17.1p, meaning the yield steps to an even-better 6.6%. Earnings are likely to resume their upward path next year as well, a 7% advance currently predicted.

I’ve been a fan of this firm for some years now, and my confidence was given a shot in the arm when it advised in early December that it “continues to see great momentum in all its businesses in the year to date and has experienced particularly strong growth in recent weeks.”

Now is a great time to load up on the insurer, in my opinion, and particularly in light  of its ultra-low valuation, a forward P/E ratio of just 10.6 times.

The eventual 9%+ yielder!

Greetings card and celebration specialist Card Factory (LSE: CARD) is another share Neil Woodford is confident enough about to have splashed the cash on.

A combination of huge cost pressures and difficult retail conditions are expected to have nudged earnings 6% lower in the year to January 2018. However, helped by its expansion programme, things are looking rosy further out, and City boffins are predicting earnings rises of 1% and 4% during fiscal 2019 and 2020 respectively.

Now unlike in fiscal 2018, Card Factory is not in line to fork out another special dividend this year. But this should not cause alarm as a predicted 14.9p per share total dividend results in a mammoth 7.4% yield.

And the 18.6p per share payment forecast for fiscal 2020 moves the yield dial to 9.2%. I am convinced Card Factory is an income share to buy and to hold onto long into the future.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Royston Wild has no position in any of the shares mentioned. The Motley Fool UK 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.

More on Investing Articles

Investing Articles

After it crashed 25%, should I buy this former stock market darling in my Stocks and Shares ISA?

Harvey Jones has a big hole in his Stocks and Shares ISA that he is keen to fill. Should he…

Read more »

happy senior couple using a laptop in their living room to look at their financial budgets
Investing Articles

How’s the dividend forecast looking for Legal & General shares in 2025 and beyond?

As a shareholder, I like to keep track of the potential dividend returns I could make from my Legal &…

Read more »

artificial intelligence investing algorithms
Investing Articles

Could buying this stock with a $7bn market cap be like investing in Nvidia in 2010?

Where might the next Nvidia-type stock be lurking in today's market? Our writer takes a look at one candidate with…

Read more »

Investing Articles

Is GSK a bargain now the share price is near 1,333p?

Biopharma company GSK looks like a decent stock to consider for the long term, so is today's lower share price…

Read more »

Snowing on Jubilee Gardens in London at dusk
Investing Articles

Could December be a great month to buy UK shares?

Christopher Ruane sees some possible reasons to look for shares to buy in December -- but he'll be using the…

Read more »

Young mixed-race couple sat on the beach looking out over the sea
Investing Articles

Sticking to FTSE shares, I’d still aim for a £1,000 monthly passive income like this!

By investing in blue-chip FTSE shares with proven business models, our writer hopes he can build sizeable passive income streams…

Read more »

Growth Shares

BT shares? I think there are much better UK stocks for the long term

Over the long term, many UK stocks have performed much better than BT. Here’s a look at two companies that…

Read more »

British Pennies on a Pound Note
Investing Articles

After a 540% rise, could this penny share keep going?

This penny share has seen mixed fortunes in recent years. Our writer looks ahead to some potentially exciting developments in…

Read more »