Passive income can feel like a magic trick, but it’s often just maths, patience, and a little bit of luck. £1,000 a year works out at roughly £83 a month.
If a portfolio produced an income rate of 4%, that would imply around £25,000 invested. At closer to 8%, the required pot could be nearer £12,500.
But there’s a catch. Dividends are never guaranteed, and a stock’s yield can change quickly if the share price moves or the payout is cut. So the real question isn’t whether £1,000 is possible, but whether it’s repeatable without nasty surprises.
One FTSE 100 name is often mentioned for its chunky dividend and long history of shareholder payouts. I thought I’d dig a little deeper into the stock’s dividend generating potential.
Dividend yield too good to be true?
Legal & General (LSE: LGEN) has been very clear about its shareholder returns in recent times.
The board intends to grow dividend per share by 2% from the year ending 31 December 2024 (FY24) onwards. It also flagged buybacks as another way to return capital through to FY27.
While dividend yields can move, the company’s is a healthy 8% as I write on 13 February, which is more than double the Footsie average.
There’s also the UK wrapper angle. Dividends from shares held in an ISA are not taxed, which is why many investors use a Stocks and Shares ISA to boost after-tax income.
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Valuation
Valuation is where it gets a bit messy. The stock has a trailing price-to-earnings (P/E) ratio of 58 and a forward P/E of 11.1 as I write.
That gap is a reminder that insurers’ reported earnings can be volatile, and one-off items can make a simple P/E ratio look strange.
The company notably has a price-to-book (P/B) ratio of 6.2 compared to a peer average of just over 2. I think this premium reflects investors’ belief in its strong market position and potential growth trajectory.
The company’s capital position is another key part of the income story. In its half-year 2025 results update, the company reported a Solvency II coverage ratio of 217%, underpinning its financial strength for dividends and buybacks.
My verdict
If the goal is £1,000 a year of passive income, I think Legal & General ticks a lot of boxes. The company’s stated dividend guidance adds some comfort, and its solvency position looks solid to me.
The risk is that high yields can be a warning sign as well as an opportunity. There are no guarantees that the yield will stay at 8% over time, or that dividends will continue to grow.
Insurers are also sensitive to markets, credit conditions, and regulation, and a dividend that looks secure today can come under pressure if capital levels weaken.
Overall, I think the company looks like a serious passive income candidate that is worth considering for investors in 2026.
