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A 6%-yielding FTSE 100 dividend stock I’d buy and hold forever

What a brilliant start to the year Legal & General Group (LSE: LGEN) has recorded. Its share price is up 25% since the fireworks marked the beginning of 2019, and as I type it is threatening to hit fresh record peaks around the 300p marker.

2018 proved to be a bit of a washout for the FTSE 100 stock as fears over a slowing global economy, and the subsequent impact on demand for Legal & General’s financial products, pushed its share price lower and lower.

I kept the faith, though, believing that the company remained in great shape to keep growing profits in spite of broader macroeconomic strife in its key markets. In fact, the UK’s rapidly-ageing population and the growing wealth levels of emerging markets convinced me that Legal & General can continue thriving many years into the future, and latest financials in March validated my bullish take.

Retirement master

Despite what the life insurance specialist itself described as a combination of “political uncertainty, asset market declines and slowing economic growth,” in 2018 it still managed to perform extremely brightly. Assets under management hit the £1trn marker for the first time while annuity sales leapt to a record £10bn.

Legal & General’s ability to thrive in spite of broader weakness in economic conditions pays testament to the whopping growth potential of its markets and its leading position therein, and particularly so in the retirement product arena. Collective operating profits from Legal & General Retirement division blew 22% higher last year to £1.12bn, a result that pushed profits at group level 10% higher to £1.9bn.

In particular, individual annuity sales continued to head through the roof and clocked in at £795m in 2018, up 18% year-on-year and reflecting changes to its product ranges and improvements to its sales and marketing operations. Legal & General’s market share here has more than trebled over the past three years  and currently stands at 19%. There’s clearly plenty more business to be won from its competitors, in a rapidly-expanding market driven by the country’s ageing population.

Those 6%+ dividend yields

I’ve argued before that Legal & General has been trading far too cheaply given its bright long-term outlook, and despite its heady share price gains so far in 2019, this is a case that can still be made.

Thanks to City predictions of a 6% profits rise this year, the financial colossus deals on a forward P/E ratio of 9.1 times. And there’s plenty of reason for income investors to break out the bunting, due to its bright earnings picture and robust balance sheet (thanks to another strong year of cash generation, the group’s Solvency II ratio remained broadly stable at 188% in 2018).

Indeed, City analysts are forecasting an annual dividend of 17.5p per share for 2019, up from the 16.42p reward of last year and continuing Legal & General’s extended record of year-on-year dividend hikes. What’s more, this estimate yields a crowd-pleasing 6.1%, smashing the FTSE 100 forward average of around 4.5% to smithereens.

Legal & General, then, is a big-paying dividend stock that’s proven it can thrive in spite of wider trouble in the domestic and global economy. And things are only going to get better in the years ahead as it improves its operations to harness demographic trends like those aforementioned ageing populations. For these reasons, I’d happily buy the blue-chip today and never sell.

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Royston Wild 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.