How many Legal & General shares do I need to buy for a £100 monthly income?

Legal & General shares offer a market-leading dividend yield. Our writer analyses the investment case for this passive income superstar.

| 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.

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.

Some FTSE 100 dividend stocks can truly turbocharge a passive income portfolio. For instance, Legal & General (LSE:LGEN) shares are among the top five highest-yielding stocks in the index. This makes them an obvious candidate for dividend investors to consider.

But how much would I need to invest to secure £1,200 in annual dividend income? And what are the risks and opportunities potential investors should be aware of?

Let’s explore.

Should you invest £1,000 in Big Yellow Group Plc 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 Big Yellow Group Plc made the list?

See the 6 stocks

Big dividend payments

Currently, Legal & General shares have a dividend yield that’s just under 9.2%. Compare that to the FTSE 100 average of 3.6% and it’s clear the financial services provider is streets ahead of its Footsie counterparts.

As I write, the Legal & General share price stands at £2.25. That means I could buy 5,829 shares for a total of £13,115. Assuming dividend payouts continue, that should produce a little over £1,200 in passive income per year, giving me £100 to spend each month.

Created with Highcharts 11.4.3Legal & General Group Plc PriceZoom1M3M6MYTD1Y5Y10YALL11 Sep 201911 Sep 2024Zoom ▾Jan '20Jul '20Jan '21Jul '21Jan '22Jul '22Jan '23Jul '23Jan '24Jul '242020202020212021202220222023202320242024www.fool.co.uk

What’s more, the business recently announced a £200m share buyback programme — its first in over a decade. This is a positive move for shareholders since the total number of outstanding shares on the market falls, thus helping to boost the share price.

Chasing a high yield can be risky

So, what’s not to love about the stock’s mammoth dividend yield?

Well, there are mixed signals about the company’s dividend sustainability. After all, shareholder distributions aren’t guaranteed, so it’s crucial to look at how reliable those all-important passive income payouts are likely to be.

On the one hand, the solvency II ratio of 223% suggests a balance sheet that’s in robust health. That’s a good start.

On the other, forecast dividend cover of around one times earnings is less impressive. Ideally, I’d like cover to be twice as strong to give me comfort. As things stand, there’s a thin margin of safety for investors on this metric.

Granted, Legal & General has steadily increased its dividend since 2009. The group plans to increase the payout until 2027. But I see a risk that this ambition could come under pressure if future revenues slump.

A long-term investment

At the Motley Fool, we advocate adopting a long-term approach to investing. Looking ahead, I think the Legal & General share price is well-placed to rise in the future.

Demographics can shape a country’s destiny, and a company’s too for that matter. Aging populations across the developed world will be a defining feature of the coming decades.

This bodes well for long-term demand for Legal & General’s retirement solutions and annuities business. Indeed, the picture’s rather rosy already. First-half individual annuity sales of £1.2bn is a record for the firm and more than double those made in the previous year.

That should be weighed against an unwelcome 41% fall in post-tax profit to £223m, albeit core operating profit showed a slight improvement to reach £849m.

I also have concerns about the company’s commercial real estate exposure. The sector faces continued challenges amid growing evidence that increased remote working is cementing itself as a permanent consequence of the pandemic.

Nonetheless, trading at a forward price-to-earnings (P/E) ratio around 9.3, this dividend stock looks cheap to me right now. At this valuation, I think Legal & General shares merit serious consideration.

5 Shares for the Future of Energy

Investors who don’t own energy shares need to see this now.

Because Mark Rogers — The Motley Fool UK’s Director of Investing — sees 2 key reasons why energy is set to soar.

While sanctions slam Russian supplies, nations are also racing to achieve net zero emissions, he says. Mark believes 5 companies in particular are poised for spectacular profits.

Open this new report5 Shares for the Future of Energy — and discover:

  • Britain’s Energy Fort Knox, now controlling 30% of UK energy storage
  • How to potentially get paid by the weather
  • Electric Vehicles’ secret backdoor opportunity
  • One dead simple stock for the new nuclear boom

Click the button below to find out how you can get your hands on the full report now, and as a thank you for your interest, we’ll send you one of the five picks — absolutely free!

Grab your FREE Energy recommendation now

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.

Charlie Carman has no position in any of the shares mentioned. 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.

Pound coins for sale — 51 pence?

This seems ridiculous, but we almost never see shares looking this cheap. Yet this recent ‘Best Buy Now’ has a price/book ratio of 0.51. In plain English, this means that investors effectively get in on a business that holds £1 of assets for every 51p 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 8.5%, 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

More on Investing Articles

artificial intelligence investing algorithms
Investing Articles

Up 272% in just a year, is Palantir stock just getting started?

This writer recognises that Palantir has grown its business very well -- but does the stock price offer him an…

Read more »

Runner standing at the starting point with 2025 year for starting in new year 2025 to achieve business planing and success concept.
Investing Articles

Up 50%? The Aston Martin share price forecast is mind-blowing! 

If analysts are right, the Aston Aston Martin share price could absolutely rocket in the year ahead. Harvey Jones says…

Read more »

Investing Articles

As the S&P 500 drops, here are 2 Stocks and Shares ISA holdings I’m watching

Our writer has different views on how President Trump's tariffs might affect these two US holdings in his Stocks and…

Read more »

Surprised Black girl holding teddy bear toy on Christmas
Investing Articles

£10,000 invested in Tesla stock at Christmas is now worth…

Tesla stock has been one of best-performing investments of the past decade. But things haven't gone to plan for investors…

Read more »

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 »