Legal & General has huge passive income potential with a forecast yield of almost 10% in 2025!

Harvey Jones got a fabulous rate of passive income from this top FTSE 100 dividend stock in 2024, and believes things will be even better next year.

| 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.

New year resolutions 2025 on desk. 2025 resolutions list with notebook, coffee cup on table.

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 FTSE 100‘s like a sweet shop for passive income investors, with loads of juicy dividend stocks to choose from.

Today, the blue-chip index yields on average 3.68%, with any share price growth on top. I can easily beat that by targeting ultra-high income stocks like asset manager and insurer Legal & General Group (LSE: LGEN).

The recent stock market dip’s knocked the Legal & General share price, making it look an even bigger bargain, while driving its yield to nosebleed levels.

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

See the 6 stocks

The stock currently has a trailing price-to-earnings ratio of 12.8. Its forecast P/E for 2025 is just 9.74 times. It seems good value to me.

The stock hasn’t done too well lately

Even as a fan, I have to admit that Legal & General’s shares have disappointed. They’ve dipped 9% over the last 12 months, and 27% over five years.

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

Much of that is down to forces beyond its control, such as the pandemic, energy shock and cost-of-living crisis. The group has a massive £1.2trn in assets under management, so it’s on the front line of stock market volatility.

So what about these things it does have some control over? First-half results published on 7 August showed core operating profit edged up from £844m to £849m, but profit after tax fell from £377m to £223m.

Its 4 December update maintained full-year profit guidance and teased investors with the prospect of share buybacks in 2025. But for me, it’s the dividend that matters.

The trailing yield’s a blockbuster 9.54%. In 2025, that’s forecast to hit 9.78%. As a rule, double-digit yields are vulnerable. Yet this one looks sustainable as the board anticipates cumulative Solvency II capital generation of £5bn to £6bn from 2025 to 2027.

My worry is that it might need to dip into that capital, given that the forecast yield is covered just 0.9 times by earnings. I remain optimistic though. The board hiked the 2024 dividend per share by 5%, and forecasts 2% growth “thereafter”. Barring shocks, I’m hopeful this will come through.

I’m looking forward to those dividends

I personally hold 1,980 shares in Legal & General. With the dividend per share forecast to hit 21.8p in 2025, I’m expecting to get £431 worth of dividends over the next 12 months. Reinvested at today’s price of 2.21p, that would buy me another 195 shares.

So I’ll still be building my long-term wealth even if the share price doesn’t grow next year. So what do the experts say? The 15 analysts offering one-year forecasts have produced a median target of 263.7p. If correct, that’s an increase of 18.6% from today. Combined with that yield, I’d be looking at a total return north of 28%.

Obviously, a lot could go wrong. Continuing higher interest rates will weigh on the shares, as investors can get higher yields from cash and bonds without risking their capital. The UK economy looks set for a rough ride, while heaven knows what President-elect Donald Trump will bring.

Yet with a long-term view I expect Legal & General shares to reward my faith in them, starting with that mighty 2025 yield.

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

See the 6 stocks

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.

More on Investing Articles

Investing Articles

This FTSE AIM stock has £2.3bn in net cash, and a market cap of £2.4bn!

I love this FTSE AIM stock, but it really hasn’t delivered for me yet. The stock trades with crazily low…

Read more »

Smart young brown businesswoman working from home on a laptop
Investing Articles

Down 15% in a week! Are these 5 FTSE 100 fallers screaming buys as markets plunge?

Five of Harvey Jones's favourite FTSE 100 stocks all have the same thing in common – they've fallen around 15%…

Read more »

Hand of person putting wood cube block with word VALUE on wooden table
Investing Articles

2 stocks that have been crushed and now offer a ton of value

Edward Sheldon has been scanning the market for stocks that offer value after the sell-off. Here are two shares he…

Read more »

Light trails from traffic moving down The Mound in central Edinburgh, Scotland during December
Investing Articles

£10,000 invested in Aston Martin shares at Christmas is now worth…

Aston Martin shares have fallen from above £10 in early 2020 to pennies today. Is this the perfect time for…

Read more »

Mindful young woman breathing out with closed eyes, calming down in stressful situation, working on computer in modern kitchen.
Investing Articles

Up 5% in the last crazy week! Are these 2 income stocks the ultimate FTSE defensive plays?

Harvey Jones picks out two FTSE 100 dividend income stocks that have actually climbed while stock markets are heading in…

Read more »

British flag, Big Ben, Houses of Parliament and British flag composition
Investing Articles

2 beaten-down UK shares that now look really cheap

Looking for cheap shares to consider for the long term? These two British stocks offer a lot of value right…

Read more »

Middle-aged white man pulling an aggrieved face while looking at a screen
Investing Articles

As stocks tank, is this a rare chance for ISA investors to get rich?

Shares have collapsed globally and valuations are becoming, on paper at least, a lot more attractive. Dr James Fox explores…

Read more »

Investing Articles

2 strong FTSE 100 dividend shares to consider as recessionary risks increase

Looking for secure passive income stocks to consider buying as thumping trade tariffs loom? Here are two FTSE 100 dividend…

Read more »