This time last year I declared two FTSE 100 income giants, Legal & General Group (LSE: LGEN) and M&G (LSE: MNG), my favourite two dividend shares. Have they lived up to expectations?
On 29 July 2024, they were offering spectacular yields of 8.76% and 9.43% respectively. Yet I was also a little frustrated. Their shares had dipped over 12 months, eroding my income gains. I thought they’d been unfairly ignored. Was I right?
M&G share price climbs nicely
Over the last year, the M&G share price has risen an impressive 26.5%. That’s terrific for a big blue-chip. Legal & General couldn’t keep up but still rose a decent 12.4%.
A year ago, Legal & General yielded a staggering 8.76%, but M&G did even better with 9.43%. They still offer a brilliant yields today, but their roles have reversed.
Legal & General’s the higher yielder of the two, paying income of 8.28% on a trailing basis, while M&G yields 7.76%. These are lower, as a direct consequence of their rising share prices, but still brilliant rates of income.
Dividend growth’s expected to slow now, but the income remains appealing. M&G’s moved to a new progressive policy, aiming to raise its payout by around 2% a year. Legal & General will now do the same. That’s below today’s 3.5% inflation rate, so the value of those increases will shrink in real terms. But if inflation eases next year as expected, the gap could narrow.
Both firms are still doing plenty to support investor returns. Legal & General announced a £500m share buyback for 2024, part of a three-year plan to return over £5bn, equal to roughly 40% of its current market value.
Legal & General could play catch-up
Legal & General looks expensive right now, trading on a sky-high price-to-earnings ratio of 88%. That’s not down to runaway enthusiasm, sadly. Earnings per share have plunged 62%, 43% and 61% respectively over the past three years. It still needs to show investors it can restore growth across the business.
2024 results in March gave cause for optimism, with operating profits up 6% to £1.62bn. Management’s sticking to a target of 6-10% compound annual growth in operating profit through to 2028.
M&G’s 2025 adjusted operating profit beat forecasts, rising 5% to £837m. It expects to grow adjusted pre-tax earnings by at least 5% a year between 2025 and 2027.
Fresh momentum’s building
M&G got a further lift in May when Japan’s Dai-ichi Life Holdings took a 15% stake. It will now act as Dai-ichi’s preferred asset manager in Europe, with $6bn in expected flows.
The financial services market remains competitive, and both firms will need to fight for growth. Global stock markets are flying at the moment, especially the FTSE 100, but if that reverses their share prices will fall too.
With dividends reinvested, I’ve enjoyed a total return of more than 60% on M&G and over 40% on Legal & General in two years. I’m happy, and hoping for more.
No share is ever truly a no-brainer. Every investor should do their own due diligence. But for those seeking income, and perhaps a bit of growth too, I think investors might still consider buying both.
