This week has been (in part) characterised by a return of wild share price swings in classic meme stocks. Moves of 100% in a day have been noted on stocks such as GameStop. So some might be confused when I flag up that the Legal & General (LSE:LGEN) share price looks very interesting to me. Up 1% in the past month and 8% over the past year, I’ve spotted something else!
Low volatility
The retirement, insurance, and investment provider has ben established for a long, long time. Therefore, it’s not a growth stock that can realistically offer me huge long-term returns. Yet what makes the share price movements appealing is the lack of volatility.
For example, over the past six months the stock has traded in a rough range between 255p and 228p. Put another way, the high-to-low move is just under 12%. For a FTSE 100 stock this is impressive. I should also note that this range has been in a trend higher, i.e., 228p was back in November versus the stock at 252p right now.
This lack of volatility is perfect for an income investor. As someone that likes to pick up dividends, the aim is to try and find a stock that pays out a good yield but also doesn’t stress me out with wild share price swings.
Legal & General has a current dividend yield of 8.26%, one of the highest in the entire index. If the share price doesn’t move in a year, then the yield is all profit. Yet if the stock falls by 10%, then all of my gains from the income gets wiped out. That’s why a steady share price is so appealing to those looking for dividends.
A positive outlook
A lack of historical volatility is great, but it’s in the past. Looking forward, I think things could continue. The results for 2023 came out in March, so that event is behind us. The half-year results in August could naturally cause some swings depending on what gets reported.
It’s also key to watch for upcoming Bank of England meetings, particularly in June and August. These meetings are potentially live for interest rate cuts. Given the investments and pensions often include exposure to the bond market, cuts should positively impact the firm. So even though there could be volatility as it happens, it should ultimately be in a good way.
A risk would be a poor set of financial results in August. The results from March weren’t amazing. Assets under management fell 3%, with £38.4bn of net client outflows. This naturally fed through to lower overall profitability. Should this pattern continue this year, investors could start to get a bit worried.
Even with the risk, I do like the look of the company for income going forward. I’m thinking about buying the stock for my portfolio as a result.
