Legal & General (LSE: LGEN) shares deliver one of the highest dividend yields of any major FTSE stock — a whopping 8.5% right now. That is nearly triple the FTSE 100’s present average of 3.1%.
However, analysts forecast it will rise to 8.7% this year, 8.9% next year, and 9.2% in 2028, although these payouts can go down as well as up over time.
Many investors may be considering retiring in the next few years. So how many L&G shares would they need to give up work now and live off the income?
How much is needed?
The Office for National Statistics places the median average salary in 2026 at around £39,000. So based on an 8.7% yield this year, I would need a capital pot of £448,276 to hit that income. That means 175,795 shares locked into my portfolio.
Few people will have half a million quid lying around the place to invest. However, much smaller investments made every month can soon build into a much bigger capital pot over time. Specifically here, just £10 saved and invested each day (£300 a month) would generate the same capital pot and £39,000 annual income after 28 years.
That includes the dividends being reinvested back into the stock to utilise the full supercharging power of dividend compounding.
Can the business support these dividends?
Ultimately, every company’s dividends are powered by sustained earnings growth. In L&G’s case, analysts forecast this growth will be a strong average of 15.4% a year over the medium term, at least.
A risk to this is aprolonged downturn in financial markets could reduce fee income across its asset‑management and pension businesses. Another is tighter regulatory capital requirements that could force the group to hold more surplus capital. That would limit its ability to drive earnings growth through new business and investment.
That said, its 2025 results showed profit before tax soar 80% year on year to £807m. This huge step‑up gives L&G far more room to support rising dividends.
The group also delivered £1.53bn of Solvency II operational surplus, up from £1.46bn. That reinforces the recurring capital generation that ultimately funds future payout growth.
And its contractual service margin now stands at £13.3bn. This is the ‘store of future profit’, with earnings already locked into the business from past policies. It gives L&G a highly visible pipeline of cash flows that helps support long‑term dividend growth.
My investment view
L&G has long been one of my core holdings designed to generate serious dividend income when I retire. Or I could use it beforehand, to keep working as and when I wished, but at a more sedate pace.
With an 8.5% yield, which is forecast to rise, it looks well placed to keep rewarding patient shareholders like me. All of this is supported by huge cash surplus generation, a deep store of future profit and soaring earnings.
Given this, I will buy more of the shares soon and have my eye on other similar stocks too.
