Legal & General (LSE:LGEN) shares have been remarkably range-bound over many years. In January 2015, each one was priced at 267p, while today they’re basically the same at 262p.
Yet last year was a positive one, with a 13.9% increase in the share price, according to my data provider. Combine this with the mountainous dividend yield, which still stands at 8.2% today, and this was a stock worth owning in 2025.
It’s one I hold in the income side of my Stocks and Shares ISA portfolio. But looking at the almost-flat share price performance over the last five years, I sometimes ask myself why I bother. Especially when I see another holding — fellow FTSE 100 insurer Aviva — up 57% in just two years.
So, should I bin this dividend stock in 2026? Or keep holding on? Let’s discuss.
It remains a top income stock
As mentioned, Legal & General’s dividend yield is massive. On a forecast rolling 12-month basis, it’s at 8.5%. This means 1,909 shares — currently costing approximately £5,000 — could bag roughly £425 of passive income in 2026.
No payout is guaranteed, of course. But management has already committed to a massive capital return plan, with over £5bn set to be returned to shareholders via dividends and share buybacks between 2025 and 2027.
The company used to raise the annual dividend by around 5%. But over the next couple of years, income growth is expected to be just 2% to accommodate buybacks.
This is welcome, in my view. The company is aiming to be more capital-light. By slowing dividend growth and using buybacks instead, Legal & General can return surplus cash (like from the recent sale of its US protection business) without committing to a bigger dividend that might be harder to maintain in future.
Over time, consistently buying back shares should also boost earnings per share (EPS), which is what a lot of investors and algorithms use to value a stock. So I’m optimistic that this will help get the disappointing share price moving in the right direction.
The outlook for our businesses is positive and we are firmly on track to achieve our financial targets. We are delivering on our promise to return more to shareholders with over £5bn in dividends and share buybacks over three years.
CEO António Simões, H1 2025.
Not a simple business
That said, one unavoidable thing investors have to accept is that earnings growth can be very lumpy due to the nature of the business.
Additionally, big interest rate swings and volatile markets affect the value of Legal & General’s vast bond and property portfolios. This can be hard for everyday investors to fully grasp, adding complexity and risk.
Then again, I suppose this complexity/risk is reflected in the potential reward of the ultra-high 8.2% dividend yield.
Ageing population
Longer term, I remain optimistic about the stock’s dividend sustainability and growth potential. As more people enter old age, demand for the firm’s core products (pensions, annuities, and wealth management) should steadily rise. It has vast expertise and a trusted brand.
All in all, I see Legal & General as an excellent choice to consider for income. So, I’m going to keep holding my shares in 2026, reinvesting the dividends to let compounding work its magic.
And I’ll cross my fingers for additional share price growth.
