How’s the dividend forecast looking for Legal & General shares in 2025 and beyond?

As a shareholder, I like to keep track of the potential dividend returns I could make from my Legal & General shares in the future.

| 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.

happy senior couple using a laptop in their living room to look at their financial budgets

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 price of Legal & General (LSE: LGEN) shares is now even lower than it was last November. After a great start to the year, it flipped-flopped around the 250p level before deciding that anything above 220p is too ambitious.

That’s okay, I’m not even angry. 

In the long run, my shares continue to deliver excellent returns via dividends. Now at 9.5%, Legal & General has the third-highest yield on the FTSE 100.

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

What’s more, it has a solid track record of increasing payments. They’ve risen at an average rate of 13.3% per year for the past 15 years.

But lest we forget, past performance is no indication of future results! So will the dividend giant continue to deliver as it has in the past?

To answer that question, I’m taking a look at the stock’s dividend forecast.

Earnings and dividend forecast

First, I should highlight that dividend estimates have declined since June, when the company announced a major overhaul. This included the sale of its housebuilding business and the departure of its asset management chief. It also introduced a new shareholder strategy, including a £200m share buyback programme

The share price slipped 5% on the news and has struggled to recover since. However, the forecast is still relatively positive looking ahead. 

The yield has increased from 6% in 2019 to almost 10% this year, largely driven by a falling price. Analysts expect it to continue climbing to above 10% next year and 10.29% in 2026.

Financial yearDividend per shareDividend yield
202421.3p9.8%
202521.8p10.04%
202622.3p10.29%

But a rising yield is not worth much if the share price keeps falling.

The growth forecast gives some hope that it won’t. Sales are expected to rise 5.15% next year and a further 5% in 2026. Net income is expected to follow suit, forecast to rise 33% next year and 8.29% in 2026.

Meanwhile, the annual dividend is forecast to increase by less than half a penny each year. The final dividend for 2024 is set at 21.3p, expected to reach 21.8p in 2025 and 22.3p in 2026. 

What’s most interesting is that earnings per share (EPS) is expected to outperform dividends, rising to 24p per share next year and 26p by 2026. 

Analysts are moderately positive about the share price, with an average 12-month target of 262p — up 20.5% from today’s price.

Screenshot from TradingView.com

Considerations

There are a few factors that threaten Legal & General’s performance, such as the recent hikes in National Insurance and minimum wage. These are likely to eat into profits during the next earnings round.

As it stands, earnings don’t quite cover the current dividend so a further drop could become an issue. If EPS doesn’t increase as forecast, the company may have to cut dividends. Both these situations could threaten the share price.

Overall, I think the current price is good value and things look likely to improve from here. Of course, that’s on the assumption that present conditions will be maintained. Right now, a lot is going on in the world, so any short-term predictions should be taken with a pinch of salt.

But long-term? I plan to be holding my Legal & General shares well into retirement.

But here’s another bargain investment that looks absurdly dirt-cheap:

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.

Mark Hartley 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.

We think earning passive income has never been easier

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

Smiling white woman holding iPhone with Airpods in ear
Investing Articles

£10,000 invested in Apple shares last week is now worth…

Apple shares are down 18% over the past week. It’s a truly phenomenal downward movement, but investors may want to…

Read more »

Investing Articles

Are shares like Tesco a safe haven for investors?

Christopher Ruane sees a lot to like about Tesco shares. But does he see them as a safe heaven in…

Read more »

Young mixed-race woman looking out of the window with a look of consternation on her face
Investing Articles

The 2025 stock market sell-off could be a once-in-a-decade opportunity to build wealth in an ISA

If a long-term investor has cash sitting in an investment ISA, now could be a good time to put some…

Read more »

pensive bearded business man sitting on chair looking out of the window
Investing Articles

Is now a good time to start buying shares?

Stock market turbulence can be alarming, but it can also offer opportunity. Our writer considers whether now could be the…

Read more »

Investing Articles

Hunting for passive income? These falling insurance giants offer 10% yields

The UK insurance sector is typically a good place to look for attractive dividend yields. Dr James Fox details two…

Read more »

Investing Articles

Considering a Stocks and Shares ISA this April? Avoid these mistakes!

When opening a Stocks and Shares ISA for the first time, it's easy to fall foul of some costly mistakes.…

Read more »

Warren Buffett at a Berkshire Hathaway AGM
Investing Articles

With global markets down 10%+ investors should remember this legendary quote from Warren Buffett

Warren Buffett is the greatest investor of all time. And he says that the best time to buy shares is…

Read more »

Investing Articles

I asked ChatGPT for the best safe havens in the FTSE 100 amid Trump’s tariffs 

Our writer isn't convinced by the answers that AI assistant ChatGPT rattled off when asked about solid FTSE 100 defensive…

Read more »