Legal & General shares look set to give me a mind-blowing 10.22% yield in 2026!

Harvey Jones is getting a brilliant second income from his Legal & General shares and expects even more to come. Does it make up for the lack of growth?

| More on:

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.

I had a bit of a splurge on Legal & General (LSE: LGEN) shares last year, buying them in April, July and August. So far, they’ve had a patchy run.

Over the last 12 months, the Legal & General share price has fallen 1.4%. That’s well behind average growth of 10.21% across the FTSE 100 as a whole. Meh.

The market may have been a little harsh. While first-half profits, published on 7 August, climbed just 1% to £849, they still beat analyst forecasts of £834m.

One of the best dividends on the FTSE 100

L&G has growth opportunities too, as it expands its US presence by investing $200m in high growth real estate sectors. Back home, it’s picking up business in the bulk annuity market. Obviously, it faces tight competition on both fronts.

The personal annuity market’s been booming, with sales doubling to £1.2bn as higher interest rates boost demand. There’s a risk this could reverse once rates fall.

A Santa Rally and a 2025 bull market would boost the value of L&G’s net assets and investment inflows. Yet its shares dipped 0.68% yesterday (6 November) despite hopes that we might get a good run under President Trump.

I’m guessing that’s down to the rising yield on bonds, as markets anticipate higher inflation. That means investors can get a higher rate of income without chancing their capital on dividend stocks like this one.

Legal & General shares may idle for some time yet, but I still don’t regret buying them. The main reason I did is because it’s a high-yield dividend supremo.

Today, it boasts a thunderous trailing yield of 9.29%. It’s a happy day when the L&G dividends hit my investment account, which has happened three times now. Sadly, I have to wait until 5 June for the next one.

I’m hoping for high and rising income

While my online portfolio shows my shares have fallen 2.77% since I bought them, with dividends re-invested I’m actually up 12%. If those dividends continue to rise, I’ll double my money in less than eight years, even if the share price doesn’t shift at all. I’ll do even better if it does rise (of course, it might fall!).

Today, I hold a modest 1,980 shares, bought at an average price of 226p. Of these, 201 were bought with reinvested dividends, just over 10% of the total. Not bad, given that I’ve held the stock for less than 18 months.

The forecast dividend per share for 2024 is 21.3p per share, up 4.8% on last year. Growth will slow from there. By 2026, it’s expected to have edged up to 22.4p. That’s a modest 5.16% growth over two years but will give me a bumper 9.9% yield, based on my original purchase price.

If I bought more at today’s lower price of 219p, I’d bag a 10.22% yield! So that’s what I’ll do, as soon as I have the cash.

Dividends aren’t guaranteed. Legal & General will be forced to cut shareholder payouts if it doesn’t generate enough cash to fund them. Yet if L&G sticks with it, I’ll get a brilliant, growing yield. Especially based on what I originally paid.

If the shares grow too, I’ll treat that as a bonus.

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.

Harvey Jones 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

Warren Buffett at a Berkshire Hathaway AGM
Investing Articles

To build a passive income flow, I’d follow this Warren Buffett approach

Warren Buffett has set up passive income streams most people can only dream about. Our writer sees some practical lessons…

Read more »

Growth Shares

As the boohoo share price falls, could it become a penny stock in 2025?

Jon Smith outlines some of the recent problems involving the boohoo share price and considers if things could get even…

Read more »

Young Asian woman with head in hands at her desk
Investing Articles

Here are the worst-performing FTSE 100 shares over the last 5 years

These five FTSE 100 shares have been complete duds over the last half decade. But is there potential for a…

Read more »

Investing Articles

Nvidia stock has tripled this year! Can it keep rising?

Nvidia's latest sales update showed strong growth and the stock's been on a tear so far in 2024. So is…

Read more »

Investing Articles

The JD Sports Fashion share price has just plunged another 16%! Buy or sell?

Harvey Jones is reeling after another sharp drop in the JD Sports Fashion share price. Should he seize the chance…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

This once-great FTSE 250 UK fashion retailer is down 47%, so is it time for me to buy?

A formerly iconic UK fashion brand, this FTSE 250 firm has fallen out of favour. But it has a new…

Read more »

Investing Articles

Nvidia share price dips despite strong Q3 results. What can we expect now?

Despite posting strong Q3 results after yesterday's market close, the Nvidia share price slipped 2.5% in aftermarket trading. Mark Hartley…

Read more »

Businesswoman analyses profitability of working company with digital virtual screen
Investing Articles

An outstanding interim report sends the Halma share price surging 10%

News of 13% revenue growth and a 17% increase in earnings per share has the Halma share price rising. And…

Read more »