Down 10% in a week! What’s wrong with the Legal & General Group share price?

The Legal & General Group share price has fallen yet again. Harvey Jones is tempted to respond by loading up on the FTSE 100 stock.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Frustrated young white male looking disconsolate while sat on his sofa holding a beer

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.

The Legal & General Group (LSE: LGEN) share price is falling yet again. Can it stop, please? This has gone on long enough.

When I started adding the FTSE 100 insurer and asset manager to my self-invested personal pension (SIPP) a year ago, I had high hopes.

Should you invest £1,000 in Legal & General right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Legal & General made the list?

See the 6 stocks

Its shares were dirt cheap, trading at a mere six or seven times earnings. I thought they looked ripe for recovery, especially when central bankers finally started cutting interest rates. 

FTSE 100 recovery play

I thought that would boost it for two reasons. First, by driving up investor sentiment and share prices generally. Second, as savings rates and bond yields fell, ultra-high-yielding dividend stocks like this one would look even more attractive.

Nice theory. Sadly, it hasn’t panned out in practice. Markets hoped for six interest rate cuts in 2024, now they reckon on just one or two. Every time hopes fade, so does the share price. It plunged 9.81% last week and is down 5.36% over one year.

Created with Highcharts 11.4.3Legal & General Group Plc PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.co.uk

Worryingly, this is a long-term trend. The shares may yield a bumper 9.1%, but who cares if the Legal & General share price keeps sliding?

Legal & General is a solid financial services play with 14m retail customers. It should be storming it as an ageing population saves for retirement while the bulk annuities market has handed it a massive growth opportunity. Yet it preferred to tinker with an affordable modular housing business, recently closed after losing almost £100m.

I wish companies would stick to their knitting. So I’m pleased to see the board is planning to auction off its Cala Homes subsidiary for around £750m.

Last Wednesday, it set out its plans to restructure the business and boost shareholder returns. As a taster, it announced a £200m share buyback. Markets weren’t thrilled. Even Aviva stretched to £300m, while some FTSE 100 buybacks have run into billions.

Dividend income star

Yet I think now is a good time to top up my stake in Legal & General, as management wakes up to the challenges. Its shares trade at 9.94 times forecast 2024 earnings. Pretty cheap, but not as cheap as last year.

Still, there’s always the dividend. The forecast 2024 yield is a blockbuster 9.5%, rising to 9.96% in 2025. Growth thereafter will slow though, with the board promising just 2% a year. That’s not great but given the high starting point, I can live with that. The market clearly disagrees, hence last week’s sell-off.

I’m glad to see the group planning a bigger pitch for the US, where opportunities are obviously much bigger. I’m going to average down by purchasing more of its shares in the weeks ahead. They’re hard to resist, given that yield. Who knows? One day I may get some share price growth, too.

Like buying £1 for 31p

This seems ridiculous, but we almost never see shares looking this cheap. Yet this Share Advisor pick has a price/book ratio of 0.31. In plain English, this means that investors effectively get in on a business that holds £1 of assets for every 31p they invest!

Of course, this is the stock market where money is always at risk — these valuations can change and there are no guarantees. But some risks are a LOT more interesting than others, and at The Motley Fool we believe this company is amongst them.

What’s more, it currently boasts a stellar dividend yield of around 10%, and right now it’s possible for investors to jump aboard at near-historic lows. Want to get the name for yourself?

See the full investment case

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.

Harvey Jones has positions in Legal & General Group Plc. The Motley Fool UK has no position in any of the shares mentioned. 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.

Our best passive income stock ideas

Do you like the idea of dividend income?

The prospect of investing in a company just once, then sitting back and watching as it potentially pays a dividend out over and over?

If you’re excited by the thought of regular passive income payments, as well as the potential for significant growth on your initial investment…

Then we think you’ll want to see this report inside Motley Fool Share Advisor — ‘5 Essential Stocks For Passive Income Seekers’.

What’s more, today we’re giving away one of these stock picks, absolutely free!

Get your free passive income stock pick

More on Investing Articles

Investing Articles

Up 279% in 5 years, could Meta stock keep soaring?

Meta stock has more than tripled in five years. This writer sees lots to like about the business but also…

Read more »

Pink 3D image of the numbers '2025' growing in size
Investing Articles

25% total return in a year? Is now the perfect time to buy BP shares?

BP shares are on the front line of today's global economic and political uncertainty but analysts think they can still…

Read more »

Affectionate Asian senior mother and daughter using smartphone together at home, smiling joyfully
Investing Articles

With Cash ISA changes coming, could now be the time to consider buying shares?

Changes to the Cash ISA could lead to greater investment in the stock market. This could be a good thing…

Read more »

Investing Articles

These FTSE 100 dividend shares just got cheaper, thanks to President Trump!

Investors buying dividend shares can lock in bigger long-term yields when share prices take a tumble. These two just did…

Read more »

Investing Articles

At a 52-week low but Taylor Wimpey shares are forecast to rise 35% in a year and yield almost 9%!

Taylor Wimpey shares have had a rough ride but Harvey Jones says analyst forecasts are upbeat, while there is also…

Read more »

Investing Articles

As copper prices surge, Glencore shares are a steal at 270p

Andrew Mackie believes the extraordinary dislocation occurring in copper markets will be very supportive for the Glencore share price.

Read more »

Investing Articles

2 cheap shares to consider as Trump shocks markets

Dr James Fox examines several cheap shares, on paper at least, as markets experience a broad sell-off in reaction to…

Read more »

Investing Articles

10% dividend yield! Here’s a FTSE 100 share to consider in April for passive income

This FTSE 100 stock just soared past the 10% yield mark, making it a potentially lucrative option for investors targeting…

Read more »