I’m planning to use my Stocks and Shares ISA to help fund my retirement. But how much do I need to invest to get there?

According to the Retirement Living Standards for 2025/26, a single person needs at least £13,400 a year. So that’s the first target.

Dividends 

The FTSE 100 has an average dividend yield of around 3.2%. So earning £13,400 a year requires a £418,750 portfolio. Contribution limits mean nobody can put that much in an ISA in one go. But there are ways to get there over time.

Investing £250 a month is one way. At a 9% annual return, that compounds to more than £418,750 in less than 30 years.

It’s worth factoring in the effects of inflation over time. But it’s hard to think of a better strategy for long-term returns. The obvious question is where to find a 9% return opportunity? But I don’t think investors need to look beyond the FTSE 100.

Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions. 

9% returns?

One stock I own is Bunzl (LSE:BNZL), the distributor of packaging, cleaning supplies, and safety equipment.

The company has an enterprise value of £9.9bn. And it generated £578m in free cash in 2025 (down from £634m in 2024). As a result, the stock’s fallen 29% since the start of 2025. But I think it looks interesting at today’s prices. 

The Gordon Growth Model helps investors value stocks like Bunzl. On this basis, I think it looks cheap. At today’s prices, a 9% annual return requires 3% growth a year. And I think that’s highly achievable.

Growth prospects 

In general, companies have three ways of growing their free cash flows on a per-share basis:

1. Higher sales.
2. Wider margins.
3. Share buybacks.

I think all three might be realistic for Bunzl over the next few years.

Acquisitions are a big part of the firm’s revenue growth. It has an outstanding record and a lot of future potential.

Margins are less obvious. But Bunzl’s looking to shift customers to its own-branded products with a view to boosting profitability.

Buybacks have been stop-start in the last year. Despite this, the firm reduced its share count by about 1%.

Ultimately, I think Bunzl’s a cheap stock with numerous growth opportunities. But as with any stock, there are risks.

Risks

In terms of revenue growth, the biggest threat recently has been price deflation. This comes from two sources. One is lower input costs, which Bunzl’s obliged to pass on to customers.

And the other is competition. That could offset the effect of some of Bunzl’s acquisitions. So revenue growth won’t be entirely straightforward.

On top of this, the firm has had issues with shifting customers to its own-branded products. This was a challenge in 2025.

All of these are reasons why the stock isn’t too good to be true. But I think it has a good chance of hitting that 3% growth target.

Opportunities 

Bunzl’s free cash flow yield is just under 6%. The question is whether management can turn that into 3% annual growth. I think they can. It’s been a tough 12 months, but the business isn’t in structural decline.

Bunzl’s already a big part of my ISA. But at today’s prices, I find it hard to think of a FTSE 100 stock I’d like more of when I have cash to spare.

The post How much do I need in a Stocks and Shares ISA to target a £13,400 annual income? appeared first on The Motley Fool UK.

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Stephen Wright has positions in Bunzl Plc. The Motley Fool UK has recommended Bunzl Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

According to AJ Bell, plenty of UK investors have been selling BP (LSE:BP) shares in the last month. And it’s easy enough to see why. 

Oil prices have been soaring, and investors are banking some profits on the assumption the recovery is fragile. Maybe they’re right — those oil prices have reversed on Friday (17 April). So let’s dig deeper.

Oil prices

Over the last three months, Brent crude has climbed by around 37%. And that’s pushed BP shares up 22%. 

Whether or not that’s justified ultimately depends on the impact on the company’s earnings. So what are analysts saying?

Expectations for this year have more than doubled. And the impact is anticipated to continue into 2027 and 2028.

A discounted cash flow (DCF) analysis tells us what this means for the stock. A 9% target return implies an 80p per share increase. 

With the stock up 103p since the start of the year, some of the selling arguably makes sense. But that’s not the only thing that matters.

Intrinsic value

Analysts might be upgrading the stock. But the boosted earnings to 2029 only account for 37% of the firm’s current share price.

In terms of enterprise value (EV) – which includes debt – the impact is smaller still. BP’s EV per share is more like £8.01.

On that basis, what matters most is what happens after 2029. An extra 80p per share in present value isn’t a huge deal. 

In fact, earnings over the next few years matter less than investors might think. Even with the recent analyst upgrades.

Around 75% of the present value has to come from what happens after 2029. And that’s the thing to focus on.

Long term

By my calculations, BP needs to average around 34p in earnings per share over time to generate a 9% return. Is that realistic?

Source: Fiscal.ai

The firm hasn’t managed this in the last 10 years. There are, however, reasons to be more optimistic going forward.

Investments in wind and solar generation have weighed on earnings. On top of this, they’ve left the firm with excess debt.

BP, however, is focusing on strengthening its balance sheet. And the windfall from volatile oil prices should help with this. 

Furthermore, the new CEO is refocusing the company on oil and gas. So the same business mistakes of a few years ago are less likely to be repeated.

Time to sell?

Investors selling BP shares are clearly looking ahead. Oil prices have already started falling and that makes the stock vulnerable.

That’s a risk. But the recent volatility should give earnings a boost that impacts the firm’s intrinsic value.

My estimate of this is that it’s worth around 80p per share. On top of this, there are also lasting consequences to consider.

An improved balance sheet and a better strategic focus should help long-term profits. And these are reasons for positivity.

Investors who have owned the stock since the start of the year have done well. I’m not sure they need to think about selling yet, but I don’t see it as one to consider buying either.

The post Why are some investors rushing to sell BP shares? appeared first on The Motley Fool UK.

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Stephen Wright has no position in any of the shares mentioned. The Motley Fool UK has recommended AJ Bell Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Greggs‘ (LSE:GRG) shares have fallen in a big way. But at a price-to-earnings (P/E) ratio of 13, the stock looks cheap. 

A closer look though, reveals a different picture. On a free cash basis, the stock actually looks quite expensive right now.

Cash is king

A company’s cash flow statement tracks how cash moves through a business. It records how it’s generated and where it’s used. In the case of Greggs, its free cash flow for 2025 was around £74m. That’s a lot lower than the £122m it reported in net income. One reason for this is the firm had unusually high capital expenditures. These came in at £287m, which represents a big cost.

Investors however, don’t need to worry too much about this. They’re one-off investments that should be much lower in future years. There is however, something that I think they do need to pay attention to. And it isn’t reflected in the company’s free cash flow.

Lease liabilities

Greggs operates a lot of stores. Many of them are rented and these leases are liabilities that the company pays back each year. In 2025, Greggs spent £63m on lease liabilities. But since that’s classified as a financing cost, it doesn’t show up in free cash flow. 

Source: Greggs 2025 Preliminary Results

The firm does report this clearly in its results. But it means the £288m capital expenditures exceeded its cash from operations.

I don’t expect that £63m figure to fall in future. In fact, I think it’s likely to go up if Greggs keeps opening more stores on a leasehold basis. 

This is something that investors should think about. My own forecast is for around £80m in free cash flows this year and then £110m in 2027. At today’s prices, that implies a multiple of around 15. I think that’s probably reasonable, but those cash flows are still two years away.

Dividends

One good thing about Greggs is that investors do get paid to wait. The stock comes with a 4.3% dividend yield. The company didn’t increase its shareholder returns in 2025. And that shouldn’t be a big surprise from its cash flow statement. 

Maintaining the dividend cost the firm a total of £70m. But that’s far more than the cash it brought in when factoring in lease payments. The firm actually took on £25m in debt during this time. From my perspective, I’d rather they cut the dividend on a temporary basis instead.

The stock market might not have liked it, but the share price has been falling anyway. And at least they wouldn’t be paying interest on the debt. Given my forecast for 2026, I’m not expecting an increase this year. After that however, things do look more manageable.

Too cheap to ignore?

Greggs’ shares look extremely cheap at first sight. But when I take a look at the firm’s leasing costs, I’m not so convinced. Based on my estimates, the stock trades at some multiples that look pretty reasonable to me. So I’m in no hurry to buy it.

There’s a lot more going on than meets the eye. And that’s without thinking about the macroeconomic outlook for the UK.

The post Here’s why Greggs shares might not be as cheap as they look appeared first on The Motley Fool UK.

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Stephen Wright has no position in any of the shares mentioned. The Motley Fool UK has recommended Greggs Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

The UK has a lot of opportunities for passive income investors. But my favourites are real estate investment trusts (REITs).

These are firms that lease properties to tenants and distribute the cash to shareholders. And the returns can be very attractive due to tax advantages they have.

Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice.

Earning income

Some REITs come with very high dividend yields. But while this can be a warning sign, a few are worth a closer look.

A 7.5% annual return is better than a savings account. And investing at that rate can bring big results over time. In Year One, a £10,000 investment earns £750. But reinvesting the dividends at the same rate means more income next year. 

At the same rate, the return in Year Two reaches £806. And by Year 10, it reaches £1,437 – more than twice the Year One return. After 30 years, this process returns £6,108 in dividends. That’s income that investors don’t have to do any work for. 

The big question is how to find 7.5% opportunities. Fortunately, the UK is an unusually good place to look. 

Primary Health Properties

Primary Health Properties (LSE:PHP) owns GP surgeries and health centres, and it’s a long-term passive income machine.

Its average lease has almost 10 years to run and the bulk of its income comes from the NHS. That’s about as reliable as it gets.

That reliability however, comes at a cost. It means chances to increase rents don’t come around often and negotiating can be tough. There’s also a risk that a change in government policy could affect demand. That’s impossible to rule out. 

The firm has however, recently acquired its biggest competitor. That should strengthen its negotiating position. 

Dividends are never guaranteed, but in terms of a reliable 7.5% yield, Primary Health Properties has to be worth considering.

AEW REIT

AEW REIT (LSE:AEWU) is the opposite of Primary Health Properties. But there’s more than one way to be a great investment.

The firm’s portfolio is a mix of different property types. These include leisure centres, gyms, and car parks.

The average lease is also much shorter, with less than six years to expiry. That obviously creates a risk of vacancies. With risk however, comes opportunity. AEW looks to use expiring leases as a chance to negotiate higher rents.

As a result, the firm focuses on properties with certain feafures. This can be low competition or scope for improvement.

Finding a 7.5% dividend yield with real growth potential is rare. So AEW has to be worth a closer look at today’s prices.

UK REITs

Stable businesses and high yields are an attractive combination. And UK REITs have been attracting attention recently. There are however, still some opportunities that I think are worth considering. These include Primary Health Properties and AEW.

A portfolio of stocks like these could be a valuable asset. And reinvesting dividends could generate real passive income.

The post How to invest £10,000 to aim for a £6,108 annual passive income appeared first on The Motley Fool UK.

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Stephen Wright has no position in any of the shares mentioned. The Motley Fool UK has recommended Primary Health Properties Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

The FTSE 100 has lost a number of high-quality companies in recent years. And another might be on the way out.

Some have been acquired and others have moved their listings abroad. But I’m looking at something quite different.

Reshuffle 

The FTSE 100 is meant to be the largest UK-listed companies by market value. But that can change as share prices move. 

To account for this, the index updates every three months. And the next reshuffle is set to be very interesting. 

Two companies have made it into the top 90 stocks. These are Harbour Energy and Ithaca Energy.

If they stay there until the June reshuffle, they’ll be included in the FTSE 100 automatically. And two firms will have to make way.

As things stand, one of the names set to be dropped is Berkeley Group Holdings. But it’s the other one that’s catching my eye.

Rightmove

Rightmove (LSE:RMV) is currently in danger. Its £3.4bn market cap is lower than quite a few FTSE 250 names. 

There’s a lot to like about the business. Its margins are huge, it has no debt, and it dominates the UK property search market. 

Investors, however, don’t seem to care. They’re concerned about artificial intelligence and the threat of disruption. 

Rightmove’s problem is that there’s not much it can say or do to ease these worries. Its latest results, for example, were good.

The trouble is, this fits with the AI disruption narrative. Things are going to be absolutely fine – until they aren’t.

Disruption?

ChatGPT can search estate agent websites to find four-bedroom houses in Oxford. But I don’t think that problem is the main issue even though Rightmove’s key strength isn’t proprietary data. What sets it apart from competitors is its network effect. 

Buyers start their searches there because it offers everything they need. So why would they stop doing this?

One answer is if agents stop listing on Rightmove. But that’s a big risk as long as it’s the first place buyers look.

The still-FTSE-100-for-now firm isn’t – as the saying goes – a potted plant (that is, not a passive observer). Staying on top has it has done for years in this space is harder than it looks. 

Costs

Despite this, Rightmove shares are clearly falling for a reason. AI is set to have a real impact on its business. 

Building out its own AI capacities is going to cost money. And that’s set to weigh on margins for the next few years. As I see it, that’s the real risk for investors. The firm expects these effects to be temporary, but what if they’re not?

Huge margins are a big part of Rightmove’s attraction so this is a threat to take seriously. Margin pressure, in my view, is the big concern with Rightmove.

Opportunity?

Rightmove isn’t my top tech stock right now. I’m looking at names with better proprietary data or regulatory protection. 

That, however, might be about to change. The stock is down around 45% from its highs and if it drops out of the FTSE 100, that could create even more selling pressure.

If that causes the share price to fall further, it could get much more attractive to me. I’ll be watching closely.

The post I sense a potential opportunity if the FTSE 100 loses this quality growth stock… appeared first on The Motley Fool UK.

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Stephen Wright has no position in any of the shares mentioned. The Motley Fool UK has recommended Rightmove Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

 The stock market is notorious for going in cycles. Growth and value shares come in and out of fashion at various times. So working out where we are now is key to figuring out where we might go next. And there are some signs for investors.

Growth and value

A classic example of a stock market cycle is the shift from growth to value and back. The core structure’s pretty straightforward. Investors naturally look for growth stocks. But then something happens that reminds them these things are supposed to have valuations.

Rising interest rates are a good candidate. So investors go looking for companies with stronger current cash flows. These are value shares. But sooner or later, investors realise these businesses don’t grow much and go back to growth stocks. And so on… 

The best way to invest is by doing the opposite of what everyone else is up to. And the situation in the US is interesting right now.

Artificial intelligence 

The rise of artificial intelligence (AI) has had a big impact on tech. But while software has faltered, other names have done well. One of these is Micron (NASDAQ:MU). Quarterly sales are up 200% and the share price has climbed 555% in the last year.

Analysts are expecting strong earnings per share (EPS) growth for the next few years. But investors do need to be careful. 

Source: Nasdaq.com

Those earnings are important. But a discounted cash flow (DCF) analysis shows that they’re not the only thing that matters. A DCF calculation shows the present value of those projected earnings. Using a 9% discount rate, they look like this: 

Together, they make up less than half of the current share price. So what happens after the next three years matters much more. 

Long-term investing

Micron’s clearly benefitting from a cyclical boost. But the question is what happens when that changes?

Sales also surged during the pandemic. When things normalised though, profits turned negative. The stock fell more than 50% as a result. And I think there’s a decent chance something similar happens again.

That wouldn’t matter if the short-term earnings boost was enough to justify the current price by itself. But it isn’t. At today’s prices, there needs to be more than just a big cyclical boost coming. Otherwise the stock looks too expensive. 

AI might mean higher long-term demand for memory chips. But, in Micron’s case at least, this is already priced in.

Foolish conclusion 

Micron’s average annual EPS over the last 10 years has been around $7. But that isn’t enough to justify a $456 share price. Assuming a 4% terminal growth rate, that’s $81 in present value. Added to $205 for the next three years, that’s well below the current price.

That means investors need AI to be more than a short-term surge in demand. It needs to be a permanent change.

The current share price implies around $22 in normalised future EPS. That’s a big increase. Given this, I think there are more compelling opportunities right now. But I’m expecting a better chance at Micron when things look less positive.

The post Stock market cycles: where are we now and what’s coming next? appeared first on The Motley Fool UK.

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Stephen Wright has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

According to Michael Burry, it’s time to buy software stocks. The industry’s valuation relative to the S&P 500 hasn’t been this attractive in 10 years.

With prices falling even as earnings grow, which names are actually worth a look?

Risks and opportunities 

There are two threats weighing on software stocks right now. One is the risk of artificial intelligence (AI) disruption.

The other is private credit. The issue is that private equity firms have taken on a lot of debt to buy software companies.

Falling valuations make refinancing these loans harder. But the equity might not cover the outstanding debt.

That could make credit conditions tighter across the board. And this could include publicly traded software names.

According to CNBC, Burry has been buying several names in the industry. And two in particular stand out to me. 

Adobe

One is Adobe (NASDAQ:ADBE). I’m interested in this because it’s actually one of the names I’m avoiding. 

The firm’s balance sheet suggests there’s no problem with debt. But it’s the disruption risk that worries me.

Adobe is an example of a horizontal software firm. That means its products are used across a variety of industries. 

That’s a good thing in terms of a big target market. And a lot of potential customers can mean strong growth prospects. 

There is, however, a downside. Lower barriers to entry make it easier for a firm to build something that fits its specific needs.

That’s the AI disruption threat writ large. And Adobe is one of the stocks I’m wary of on those grounds.

Veeva

Veeva Systems (NYSE:VEEV) is different. It specialises in software for life sciences industries, which are highly regulated. 

That means switching isn’t just about finding a better product. Any alternative has to be officially validated as compliant.

It also means building a better product is just plain harder. Veeva’s software is designed specifically for the industry. 

Specialisation does bring risks. It means the firm is more exposed when the industry goes through tough times. 

This is been happening with Veeva in the US recently. And this is something investors need to take note of. 

In terms of AI, though, I don’t see a big disruption risk. And like Adobe, its balance sheet means debt shouldn’t be an issue.

Opportunity?

Software stocks haven’t been this cheap relative to the S&P 500 in the last 10 years. So the industry has to be worth a look. 

Investors buying Adobe shares should know they’re in good company. Michael Burry is a serious and sophisticated investor. 

By itself, though, that’s not a good enough reason to buy a stock. And I’m wary of the threat of AI disruption.

With Veeva Systems, my view is much more positive. I think the barriers to entry for AI competitors are much higher. 

Like Burry, I’m looking at more than one name in the industry. And Veeva is one of the names on my list right now.

The post A once-in-a-decade chance to buy software stocks? appeared first on The Motley Fool UK.

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Stephen Wright has no position in any of the shares mentioned. The Motley Fool UK has recommended Adobe and Veeva Systems. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Wise (LSE:WISE) has been one of the UK’s most fascinating growth stocks. Since 2021, the firm has doubled in size and strengthened its competitive position.

The share price, however, has gone nowhere. And while the company sees this as a reason to move to the US, I see an opportunity.

Payment processing

Since 2021, Wise has more than doubled its active users. And quarterly payment volumes have gone from £16.4bn to £49.4bn. 

It’s also increased its direct connections and lowered its take rate. That makes it faster, cheaper, and more reliable.

In short, Wise is twice the size and much stronger than it was when it went public. And it isn’t really slowing down.

The latest quarterly update revealed 22% growth in customers and a 26% increase in volumes. In short, things are still going well.

Despite all of this, the share price is largely where it was. And management is looking to do something about it.

The stock market

Wise’s leadership thinks the stock could do better with a primary listing in the US. And they might be right.

The company focuses on reinvesting the cash it generates. And this has worked very well in recent years.

The trouble is, that’s not what a lot the UK market is looking for. Having no dividend limits its popularity with income investors.

Wise’s share structure means it doesn’t qualify for the FTSE 100. And that cuts it off from another large investor class.

Neither of those is a bad thing intrinsically, but they don’t align well with Wise’s strategy. Neither, however, applies in the US.

UK stocks

In general, US investors are less focused on dividends. So they’re likely to be more receptive to Wise’s strategy.

A dual class share structure also doesn’t rule the stock out of the S&P 500. So it also stands to benefit from passive investing.

Wise’s management might therefore be right about what’s been holding the stock back. It could well do better in the US.

Whether or not that’s a good thing, though, depends on perspective. Low prices are bad for sellers, but they’re good for buyers.

Compared to 2021, investors have the chance to buy more than twice the business at the same price. That’s a rare opportunity.

Risks and rewards

A lower share price doesn’t change the underlying business. And it doesn’t remove any of the associated risks.

These include the impact of geopolitical tensions. This might be the biggest threat to international transfer volumes right now.

Neither Wise nor its shareholders can do much about this. So the question for investors is how to limit the overall risk.

Buying the stock at a lower price helps a lot with this. It gives investors a margin of safety against threats they can’t control.

That means a discounted share price is a good thing for buyers. And that’s why I think the UK is the place to look for opportunities.

Foolish conclusion

The UK isn’t the first place growth investors usually look. But that’s exactly why it might have the best opportunities.

Wise is a unique example. And I’m not saying every UK growth stock is systematically undervalued.

I do think, though, that less buying interest makes for better opportunities. And that’s why the UK is where I look first.

The post Why the UK might be the best place to look for growth stocks appeared first on The Motley Fool UK.

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Stephen Wright has no position in any of the shares mentioned. The Motley Fool UK has recommended Wise Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

The time to buy shares is when they’re undervalued. But how do investors know when that is?  The answer is with a discounted cash flow (DCF) analysis. And one tech stock stands out to me right now.

Discounted cash flow

A DCF calculation is a good way to value a business. It tells investors how much a stock is worth given certain assumptions. The calculation computes a value for a stock based on its future cash flows and a desired rate of return.

But that’s not all. Investors can also use the current share price and a rate of return to calculate implied future growth. And that’s what I’ve been doing. 

Falling share prices imply lower growth forecasts. And this is what has been happening with software stocks recently. Investors are rethinking their future growth expectations, due to the threat of artificial intelligence (AI). 

Lower sales and/or profit margins are a genuine possibility. But in some cases, current expectations have become very low.

Investing equation 

Shares in Roper Technologies (NASDAQ:ROP) have fallen 41% from their highs. As a result, the enterprise value is $424 per share.

Management is forecasting adjusted earnings per share of $21.30 in 2026. And that’s a pretty good proxy for free cash flow.

A growth rate of 3% is usually reasonable for most companies. And a 9% target return is what I’m looking for from the stock. From here, a reverse DCF calculator can tell us the implied growth rate for the next five years. Here, it’s just over 6%.

Given that full-scale AI is still some way off, I think that’s highly achievable. That’s why I’ve been buying the stock. The falling share price has made a real difference. At its highs, the implied growth was much higher and the risk was much greater.

Valuations

At those highs, Roper had an enterprise value of $566 per share. And that makes the equation very different. At that level, a long-term growth rate of 3% implies 9% a year for the next five years. That’s possible, but it’s more demanding.

Acquisitions have been a big part of Roper’s growth in recent years. This has worked well, but it can be a risky strategy. The danger comes from overpaying for a business. And the firm has been paying higher multiples in recent years. 

In the last few months however, the company has been seeing more value in its own stock. So it’s shifted to share buybacks. At the current multiples, this alone could get the firm most of the way to the 6% implied growth. That makes me optimistic.

Buying

A lot of software stocks are falling, but Roper looks very attractive to me. It offers investors something most other companies don’t.

The firm is a collection of businesses that specialise in different industries. That means it comes with two key advantages. One is diversification. Having operations across various different industries limits the impact of competition in any one.

The other is depth. Focused subsidiaries create more specialised products that are harder for competitors to disrupt.

Those two points are crucial. And with modest growth assumptions going forward, the stock is on my Buy list.

The post My DCF analysis says it’s time for me to buy tech shares appeared first on The Motley Fool UK.

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Stephen Wright has positions in Roper Technologies. The Motley Fool UK has recommended Roper Technologies. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

A big dividend yield can be a huge opportunity. But it can also be a sign that other investors are worried about something.

Legal & General‘s (LSE:LGEN) a good example. The stock comes with an 8.4% yield, but investors need to think why? 

Returns

Five years ago, Legal & General shares were trading at 296p. Since then, investors have received 98.28p per share in dividends. Unfortunately, the stock’s fallen 36.3p. So the net gain is 61.98p, or around 21% – well below the FTSE 100 average.

Why is this? One reason is that the company’s book value – the difference between its assets and its liabilities – has been falling.

Source: Fiscal.ai

A good amount of this is the direct consequence of the dividend. As the firm returns cash to investors, those assets leave the balance sheet.

In 2025, Legal & General distributed £1.25bn in dividends. And the firm’s book value fell from £3.51bn to £2.31bn.

The thing is, there’s more to this company than its book value. Investors also need to look at something called the Contractual Supply Margin (CSM).

Contractual Supply Margin

When Legal & General wins an annuity contract, it gets the premiums up front. But they don’t show up on its balance sheet straight away. The profits are added during the life of the policy. Each year, a bit more appears as long as the firm’s investments stay ahead of its payouts. 

The CSM is the store of profits set to be added in the future. And the change in this is just as important as the book value. In 2025, this actually grew by £200m. That’s despite Legal & General moving around £1bn to its balance sheet in operating income.

If that sounds complicated — good. And there’s plenty more to account for in terms of interest rates and risk adjustments. That, however, is why the dividend yield is so high. Investors can think of it as compensation for taking certain hard-to-assess risks. 

Underwriting and investing

In some ways, Legal & General’s insurance operation is like its stock. Both involve a process of getting paid to take on risks. The firm’s business involves getting paid premiums to take on future liabilities. And it has to figure out whether or not it’s worth it. 

Something similar is true for investors. Anyone who buys Legal & General shares gets a dividend in exchange for owning part of the business. The investor’s job is to figure out whether or not it’s worth it. And this involves assessing quite a lof of things.

These include changes in interest rates and the impact of people living longer. But those are very difficult to evaluate. That’s a big part of why the dividend yield is high. Investors rightly want to be compensated for taking risks they can’t easily assess.

Too hard

Legal & General’s 8.4% dividend yield isn’t free money. It’s a risk premium for investing in an extremely complicated business.

Is it high enough? It’s hard to tell – the company’s balance sheet doesn’t even tell the full story about what’s going on. As billionaire investor Warren Buffett says, risk comes from not knowing what you’re doing. And for most people – including me – that’s the case here.

Fortunately, there are quite a few other stocks that are more straightforward. One or two of them even come with similar dividend yields.

The post 8.4%! Why do Legal & General shares always have such a high dividend yield? appeared first on The Motley Fool UK.

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• Buying £20k of Legal & General shares could give me a £1,714 income this year!

Stephen Wright has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.