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Legal & General stock: A safer bet with promising dividends
Stock Analysis & Ideas

Legal & General stock: A safer bet with promising dividends

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UK-based financial services company Legal and General’s stock is down by almost 15% this year. Time to buy?

Legal and General Group (GB:LGEN) is a leading provider of life insurance, retirement, pensions, mortgages, and other investment services – but has certain unique features which could make it a great choice for your portfolio.

The company’s stock is on the recovery path after being hit by COVID and then by the Russia-Ukraine war.

But the stock still has a lot of room for growth, with revenue growth over the years (not to mention a solid dividend payout).

Stable business model

Legal and General Group has a strong hold on the market with a customer base of over 10 million worldwide.

The company has a unique business model wherein its business segments create internal demand and supply for each other. This has helped the company to achieve a return on equity (ROE) of 21%, reflecting strong performance across all business segments.

Last month, the company posted its interim results for 2022 with a strong operating performance in line with its expectations. The operating profit increased by 8% to £1,079 million, and the cash generation was up by 22% to £1 billion.

The company’s balance sheet was also strong with a solvency II coverage ratio of 212%, which was highly supported by rising interest rates.

It also remains on track with its five-year ambitions to raise cash and capital generation of £8 to £9 billion by 2024. With this, the company is targeting generating enough cash to exceed its dividend commitment at all times.

Stronger dividend game

The USP for this stock is its dividend story. Legal and General was among the companies that didn’t cut their dividends during the pandemic. This shows their commitment to shareholder return.

The company has an impressive dividend yield of 7.6% as compared to the industry average of 2.03%.

It has a progressive dividend policy as it is targeting cumulative dividends between £5.6 and £5.9 billion by 2024. This was laid down as a five-year plan in 2020, and it has already reached a level of £2.5 billion so far.

In its 2022 half-yearly results, the company announced an interim dividend of 5.4 p, which was 5% higher than the previous year.

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A perfect 10 score

According to the TipRanks Smart Score tool, Legal and General stock has a ‘perfect 10′ score. This means the stock is most likely to outperform the market’s returns.

As per this tool, the stocks are assigned a number between one and ten based on eight different factors including analyst ratings, news, technical analysis, and more.

Are Legal and General shares a buy or sell?

According to TipRanks’ analyst rating consensus, Legal and General stock has a Moderate Buy rating. The stock has seven Buy and three Hold recommendations.

The LGEN price target is 320.5p, which is 34% higher than the current price level.

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Barclays analyst Larissa Van Deventer has the highest target price on the stock at 390p, which has an upside potential of 65.5%. She has recently reiterated her Buy rating on the stock.

Conclusion

For investors who are looking for a stock to add on their passive income, Legal and General is a perfect investment opportunity.

With a strong brand name and consistently growing dividend, this stock is hard to miss.

Disclosure

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