Is Legal & General Group one of the FTSE 100’s greatest value shares?

Legal & General shares boast low P/E ratios and massive dividend yields. Could they be one of the London stock market’s greatest bargains?

| More on:
Young black colleagues high-fiving each other at work

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Hopes of falling interest rates have lifted the FTSE 100 in recent weeks. Yet Legal & General Group (LSE:LGEN) shares have failed to ignite despite the boost that rate cuts would give to its operations.

Legal & General's share price performance.
Created with TradingView

At 246.9p per share, the financial services giant has actually fallen in value since the start of the second quarter. The Footsie, on the other hand, is up by low-to-single-digit percentages over the period.

This means that — on paper at least — Legal & General’s share price still looks like one of the London stock market’s greatest bargains. Here’s why.

All-round value

Firstly, the company looks dirt cheap when based on earnings forecasts for the current year.

Today, it trades on a forward price-to-earnings (P/E) ratio of 10.2 times, below the FTSE 100 average of 11 times. But what really grabs my attention is its rock-bottom price-to-earnings growth (PEG) ratio of 0.1.

Any reading below 1 indicates that a share is undervalued relative to its predicted growth trajectory.

On top of this, the firm’s dividend yield for 2024 provides a spectacular sweetener. At 8.6%, this is more than twice the UK blue-chip average of 3.5%.

Sector value

It’s important to remember that the FTSE 100 consists of companies spanning a wide variety of sectors. For this reason, it’s also a good idea to compare how Legal & General stacks up to many of its industry rivals in terms of value.

CompanyForward P/E ratioForward dividend yield
 Aviva 11.3 times 7.4%
 Prudential 10.5 times 2.3%
 Allianz 10.6 times 5.7%
 Aegon 8.1 times 5.5%
 AXA 9.5 times  6.4%
 MetLife 8.3 times 2.9%
 Average 9.7 times 5%

As we can see, the Footsie firm’s reputation as a value stock becomes more blurred based on the industry average.

Its dividend yield comfortably beats its peer group average by a good three-and-a-half percentage points.

It offers less impressive value based on earnings however. Its P/E ratio of 10.2 times is above the industry average. However, the margin between this and the broader industry’s corresponding readout is pretty thin.

Here’s my take

On balance, I believe Legal & General shares are very attractive at current prices. It’s why I’ve been recently buying them for my Self-Invested Personal Pension (SIPP).

I was especially attracted by the company’s gigantic dividend yields. The passive income streams I might receive could go a long way to supercharging my long-term wealth.

Any dividend income I receive would be ploughed back into the market to buy even more stocks. This snowball effect (known as compounding) can significantly grow the size of my portfolio over time.

And by buying Legal & General shares, I’d likely have more to spend than if I’d invested in lower-yield companies. I’m confident that dividends from the business will rise steadily over time too.

The financial services giant has to overcome heavy competitive pressures to grow profits. But Legal & General has a great track record on this front, helped by its substantial brand power and wide range of industry-leading products.

This is a top value share I plan to hold for the long haul.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Royston Wild has positions in Aviva Plc, Legal & General Group Plc, and Prudential Plc. The Motley Fool UK has recommended Prudential Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Young black man looking at phone while on the London Overground
Investing Articles

This 10.6% yielder beats every dividend share on the FTSE 100. Can it last?

Harvey Jones couldn't resist the double-digit yield on offer from this FTSE 100 stock. Now he'd like to get some…

Read more »

A pastel colored growing graph with rising rocket.
Investing Articles

With the FTSE 100 flying, I love the look of this company

The FTSE 100 index has been in rally mode over the last few months, but I think one of it's…

Read more »

Investing Articles

17% of my Stocks and Shares ISA is invested in these 2 UK shares

Stephen Wright looks to focus on investments in companies that have strong competitive advantages. And two UK shares stand out…

Read more »

Investing Articles

Here’s how much income I’d get if I invested my entire £20k ISA into Lloyds shares

Harvey Jones bought Lloyds shares last year and is kicking himself for failing to buy even more of them. The…

Read more »

Smiling white woman holding iPhone with Airpods in ear
Investing Articles

Apple is still my favourite company in the S&P 500, here’s why

Apple recently unveiled a lot of new software at a developer conference. Here's why the tech giant is still my…

Read more »

Investing Articles

5 great value UK companies I’d buy in a Stocks and Shares ISA and aim to hold for decades 

Harvey Jones is getting to work on his Stocks and Shares ISA. He thinks these five firms have solid income…

Read more »

Value Shares

Are GSK shares a bargain after falling 11%?

GSK shares have taken a hit in recent weeks due to Zantac uncertainty. Here, Edward Sheldon looks at whether they’re…

Read more »

Investing Articles

Nearing £5, could the Rolls-Royce share price hit £6?

The Rolls-Royce share price has soared in the past year. Our writer thinks there could be a strong runway ahead…

Read more »