Legal & General shares have the potential to help investors achieve their investment goals in 2024.
The FTSE 100 stalwart has shaken off the worst of the macroeconomic concerns, and the Legal & General share price is around 25% higher than the worst levels of 2023.
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With the shares now trading in the vicinity of 52-week highs, investors will question whether it has the momentum to break through 260p – 270p and attack 300p in 2024.
There is a weight of supporting factors that suggest it will.
Legal & General Valuation
Legal & General trades at 6.7x historical earnings. No matter what happens to earnings in the next year, this is cheap and underscores the opportunities in the shares. At a 6.7x multiple, Legal & General shares have a long way to go before they trade back in line with historical averages.
Apart from 2020 and 2022, Legal & General’s historical PE Ratio has averaged above 10 on an annual basis every year since the financial crisis.
Although one may want to hold off jumping straight into Legal & General shares at the current price or set out a dollar-cost averaging strategy, the capital appreciation element of Legal & General shares in 2024 is compelling.
Legal & General Dividend Yield
Despite a rip-roaring rally through Q4 2023, Legal & General shares still yield 7.7%. The dividend is well covered at 1.9x, and the company is committed to a progressive dividend policy. One would expect the dividend to increase in 2024.
Improving macroeconomic environment
It is not that the economy is entirely out of the woods that supports Legal & General’s investment case, but more that there is light at the end of the tunnel. Investors can see a clear path to a more favourable macro environment.
Inflation rates are falling globally, and interest rates will not be too far behind. Lower interest rates will boost financial conditions and support Legal & General’s top and bottom lines.
The doomed mini-budget in 2022 that rocked Legal & General’s fixed-income activities is now a distant memory, and the shares deserve a rerate.
