Today Legal & General (LSE:LGEN) shares offer the largest near-term dividend yield on the FTSE 100.
While the Legal & General share price is up 4% since 1 January, a fresh drop — combined with predictions of more lucrative dividends — have seen it knock WPP off the top step.
At 238.6p per share, the company’s dividend yield for 2025 is an impressive 9.1%. And it moves steadily above that level over the following two years thanks to predictions of further sustained payout growth.
It means a £10,000 lump sum investment in Legal & General will deliver a passive total passive income of roughly £1,880 in 2026 and 2027.
But how robust are current forecasts? And should savvy investors consider buying the FTSE company today?
9%+ dividend yields
| Year | Dividend per share | Dividend growth | Dividend yield |
|---|---|---|---|
| 2026 | 22.23p | 2% | 9.3% |
| 2027 | 22.71p | 2% | 9.5% |
Dividends on Legal & General shares have risen almost every year since 2012. The only year they didn’t grow was during pandemic-struck 2020, when it joined a raft of UK blue-chip shares in freezing the annual dividend.
As the table above shows, it’s a trend that City analysts expect to continue over the short-to-medium term at least.
The qualities that have made the company a passive income powerhouse remain very much alive today. In short it’s a cash machine, throwing out banknotes that it can distribute to shareholders through dividends and share buybacks.
Between 2025 and 2027, Legal & General plans to return a total of £5bn to its investors. That’s supported by its plans to deliver Solvency II operational surplus generation of £5bn-£6bn over the period.
Good and bad
Plans are all very well and good. But as we saw during Covid-19 crisis, these can come crashing down when unexpected events happen and earnings drop.
So how strong are the City’s payout forecasts? Based on predicted profits, they’re pretty flimsy if I’m being honest.
This year’s predicted dividend is actually higher than expected earnings per share of 20.78p. Things improve for next year, though expected earnings of 24.98p result in dividend cover of just 1.1 times. That’s significantly below the safety benchmark of two times and above.
Yet thin cover is nothing new at Legal & General. And thanks to that strong balance sheet we’ve discussed, it hasn’t stopped the company paying a large and growing dividend over time.
The company’s Solvency II ratio of 217% as of June was more than double regulatory requirements.
A top dividend stock
On balance, I think Legal & General’s a top dividend stock to consider right now.
Its share price may wobble in the short term if consumers tighten their belts. But I still expect it to continue dishing out market-beating dividends over the next couple of years.
In fact, I’m confident it’ll keep paying large and growing cash rewards over the long haul. The competitive nature of the financial services industry creates a risk. But I’m expecting Legal & General to leverage its brand power to grow profits as demand for retirement and investment products booms.
