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Legal & General (LSE:LGEN) has experienced a significant decrease in its share price over the past two years, with an 8.9% drop in the past year and a total decline of 26% over the past two years. Despite this downturn, the company’s dividend yield has risen to 8.8%, which is highly sought after by investors. This comes as the company maintains a robust dividend health, demonstrated by a consistent payment history and a strong dividend coverage ratio of 1.98 times in 2022.
In a challenging macroeconomic environment, Legal & General reported an H1 operating profit of £941m, slightly below the previous year but still in line with its five-year financial objectives. The company, which does not participate in buybacks, primarily rewards its shareholders with dividends.
The firm aims to generate between £8bn and £9bn in capital by 2024, with £5.9bn already secured. Legal & General’s Solvency II coverage ratio, a key indicator of financial strength, increased year-on-year from 212% to 230%.
As a leader in the Bulk Purchase Annuities (BPA) market, Legal & General handled transactions worth £7.2bn in 2022. The BPA market has grown from £10bn in 2016 to over £50bn in 2022, and Legal & General was the top BPA provider in the UK for 2022.
Despite leadership changes following Sir Nigel Wilson’s retirement and a lower share price than five years ago, Legal & General remains steadfast. The company generated a net surplus exceeding dividends by £600m and deferred new business profits worth another £600m.
Although investor views may differ on Legal & General’s performance, The Motley Fool UK suggests that there’s no catch to the high dividend yield. Furthermore, only 15% of the UK’s defined benefit programs have been transferred to insurance providers like Legal & General, indicating potential growth for the company in the future.
InvestingPro Insights
InvestingPro data and tips offer valuable insights on Legal & General’s performance and outlook. The company’s market cap stands at a substantial 16308.05M USD. Its P/E ratio is at 6.53, indicating a relatively low valuation compared to earnings. The company’s dividend yield is impressive at 8.82%, reflecting its commitment to rewarding shareholders despite the challenging market conditions.
Two InvestingPro Tips that stand out are that Legal & General has raised its dividend for 14 consecutive years and pays a significant dividend to shareholders. These tips align with the company’s strategy of primarily rewarding its shareholders with dividends, as noted in the article.
InvestingPro provides a wealth of additional tips for Legal & General and other companies, providing valuable insights for investors. It’s worth noting that despite some financial challenges, Legal & General has managed to maintain a robust dividend health, which is a key factor for dividend-focused investors.
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