Among trending stocks in the UK market, last week shares of British financial services provider Legal & General (GB:LGEN) fell after the company announced its strategic plan for the next five years. The stock was impacted by the company’s decision to increase its dividends by 2% in each of the next five years, reflecting a lower growth rate than the 5% planned hike for 2024 dividends. Despite the lower growth rate, Legal & General continues to be an attractive dividend pick in the UK market, given its solid yield.
LGEN stock offers a dividend yield of 9.05%, well above the sector average of 2.1%. Moreover, share buybacks and stock price appreciation could further enhance shareholder returns.
Legal & General offers life insurance, pensions, retirement, and investment services.
TipRanks provides a range of tools to help users identify dividend stocks that align with their investment goals. Here, we used TipRanks’ Comparison Tool for top dividend-paying companies in the UK market to identify LGEN stock. This tool simplifies the stock selection process, making it more efficient for users seeking passive income.
Legal & General’s Dividends
Earlier this year, Legal & General announced a final dividend of 14.63p for 2023, bringing the full-year dividend to 20.34p. The full-year dividend for 2023 reflected a 5% growth from the prior-year’s payment of 19.37p.
As per Legal & General’s new strategic plan, the company is targeting enhanced shareholder returns through a combination of share buybacks and dividends. The first share buyback will be worth £200 million in 2024, followed by “similar buybacks.” Meanwhile, the company plans to raise its dividend per share by 2% through Fiscal 2027.
LGEN’s dividends are backed by solid financials. The company delivered a resilient performance in 2023, with operating profit remaining almost flat at £1.67 billion. Legal & General aims to increase its core operating earnings per share (EPS) at a CAGR (compound annual growth rate) of 6% to 9% over the 2024-2027 period, with an operating return on equity of more than 20%.
As part of its efforts to improve its financial position, the company is reorganizing its business into a simpler structure. It plans to merge Legal & General Investment Management and Legal & General Capital into a single Asset Management division. The company also intends to sell non-strategic assets like its housebuilding business Cala.
Is LGEN Stock a Buy, Sell, or Hold?
With five Buys and three Holds, LGEN stock earns a Moderate Buy consensus rating on TipRanks. The average Legal & General share price target of 277.88p implies 23.2% upside potential. LGEN shares are down about 4% year-to-date due to macro pressures and elevated interest rates.
