I’d buy 10,228 shares of Legal & General stock for £2,000 in yearly passive income

Legal & General is looking better than ever as a dividend stock. Here’s how I’d target a £2,000 passive income from buying its shares.

| 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.

Elevated view over city of London skyline

Image source: Getty Images

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.

Legal & General (LSE: LGEN) has bumped up its dividend again. Is it now the best income stock on the FTSE 100?

Well, for one, It pays out the seventh biggest yield on the Footsie. Also, at its current level, it’s one of the few stocks to pay out a rate higher than inflation. Forecasts say the dividend should keep increasing over the next few years as well.

I’d like to take advantage and target a £2,000 yearly passive income. Here’s how I’d go about it.

Should you invest £1,000 in Legal & General right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Legal & General made the list?

See the 6 stocks

The Legal & General share price is now 218p and its full-year dividend is 18.64p. As a yield, that means I’m getting back 8.97% over the year from any investment I make. 

Created with Highcharts 11.4.3Legal & General Group Plc PriceZoom1M3M6MYTD1Y5Y10YALL22 Aug 202222 Aug 2023Zoom ▾Sep '22Nov '22Jan '23Mar '23May '23Jul '23Oct '22Oct '22Jan '23Jan '23Apr '23Apr '23Jul '23Jul '23www.fool.co.uk

For me to receive £2,000 each year then, I’d need a £22,297 investment into the stock. In terms of the shares, I’d need to buy 10,228 to get that much. 

That sounds nice in theory, but a dividend is about more than one year. I want to know if Legal & General will be a reliable payer in years to come.

If it will, then I’d see my £2,000 passive income rise as dividends go up. I could also reinvest them to make the income stream go even higher. With that high payout, it might even be the best FTSE 100 dividend stock. So, let’s look at the evidence.

A reliable dividend?

First, the firm isn’t having to spend too much of its money on its dividends. Last year’s payment was covered 1.9 times by earnings. That’s a big margin of safety. One that a few other of the higher FTSE 100 dividend stocks don’t have. 

Second, the firm has increased payouts year after year. In fact, in this century, the dividend went up every year except for the two that followed the 2008 crisis. A track record like that is one of the best pieces of evidence for it to continue in the future. 

Last, analysts forecast the dividend to continue rising for the next five years. These aren’t perfect predictions, but they’re right more often than they are wrong. I’m happy to note that they don’t see any obvious problems in the near future.

Best on the FTSE 100?

A word on the risks. The biggest one for me is the sector, as finance comes with its own unique issues. The 2008 crisis was an obvious example from the past. If something like that happens again, the dividend would be under threat. 

So yes, I do believe this will be a reliable dividend. I’d even say it’s one of the best on the FTSE 100. I own the shares already, but I’ll look to buy more and aim for my £2,000 passive income target.

Should you buy Legal & General now?

Don’t make any big decisions yet.

Because Mark Rogers — The Motley Fool UK’s Director of Investing — has revealed 5 Shares for the Future of Energy.

And he believes they could bring spectacular returns over the next decade.

Since the war in Ukraine, nations everywhere are scrambling for energy independence, he says. Meanwhile, they’re hellbent on achieving net zero emissions. No guarantees, but history shows...

When such enormous changes hit a big industry, informed investors can potentially get rich.

So, with his new report, Mark’s aiming to put more investors in this enviable position.

Click the button below to find out how you can get your hands on the full report now, and as a thank you for your interest, we’ll send you one of the five picks — absolutely free!

Grab your FREE Energy recommendation now

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.

John Fieldsend has positions in Legal & General Group Plc. 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

Chalkboard representation of risk versus reward on a pair of scales
Investing Articles

Is it worth me buying Lloyds shares at around 70p after a 6% dip?

Lloyds shares have dropped 6% from their 12-month high, which may indicate a potential bargain. I took a closer look…

Read more »

Arrow symbol glowing amid black arrow symbols on black background.
Investing Articles

Investors considering a £5,500 holding in this FTSE 250 heavyweight could make £11,129 in annual dividend income over time!

This FTSE 250 global investment manager pays one of the highest yields in any major FTSE index right now. Its…

Read more »

Businesswoman calculating finances in an office
Investing Articles

With Nvidia stock down 30% in the tariff panic, should we buy now?

Nvidia stock has slumped in the new trade war, though it's still up 1,300% over the past five years. What…

Read more »

British Isles on nautical map
Investing Articles

This industrial giant is the UK’s largest business, but it’s not a FTSE 100 stock!

The FTSE 100 index is an obvious place to look for Britain's biggest companies, but the most valuable UK stock…

Read more »

Young Asian man drinking coffee at home and looking at his phone
Investing Articles

Here’s a 5-stock FTSE 100 portfolio that could generate £800 a month in passive income

Mark Hartley calculates the potentially lucrative returns of five popular FTSE 100 dividend stocks invested in a Stocks and Shares…

Read more »

Investing Articles

Up 40% in 2025, is this 1 of the best cheap UK shares to consider buying right now?

Looking for UK shares to cash in on the gold rush could be a great idea to consider. Here's one…

Read more »

Portrait of elderly man wearing white denim shirt and glasses looking up with hand on chin. Thoughtful senior entrepreneur, studio shot against grey background.
Dividend Shares

Is it wrong for me to buy these FTSE 100 tobacco stocks?

These two FTSE 100 tobacco stocks have thrashed the wider UK market over one and five years. But would it…

Read more »

Investing Articles

Is this a great opportunity to lock in big dividend yields for a second income?

Dividend yields rise as share prices fall. That’s why many investors will see a bear market or correction as an…

Read more »