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This FTSE 100 bargain share pays an 8% dividend. I believe this cash payout is rock-solid!

Over a 15-year period from 1987 onwards, I worked for a string of different insurance companies, including FTSE 100 and private firms. During this decade-and-a-half, I came to realise just how profitable writing insurance really is. That’s why I’ve been a long-term fan of FTSE 100 insurance firm Legal & General Group (LSE: LGEN).

A £13bn FTSE 100 survivor

For most of the Noughties, I owned shares in L&G, as part of a portfolio heavily skewed toward FTSE 100 financial firms. Then, as the storm clouds of the global financial crisis gathered, I sold my L&G shares – in early 2008, I believe. I wish I had held on to my holding, because this is a great business to own.

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Yesterday, L&G released its half-year results, to which the market responded coolly by sending this FTSE 100 share up only 2.9p (1.3%) to close at 223p. Personally, I think it should be much higher, regardless of the economic havoc caused by coronavirus.

In its latest results, the FTSE 100 stalwart unveiled operating profit of £946m, 5.9% lower than last year’s £1,005m, partly due to £129m of Covid-19-related provisions. Profit after tax was much lower at £290m (H1/19: £874m), mainly due to lower interest rates and the impact of market movements.

But the real joy of L&G lies in its incredibly robust, almost bombproof, balance sheet. L&G’s ‘Solvency II coverage ratio’ rose to 173% from 171% last year. This level of cover makes this FTSE 100 firm a financial fortress during market meltdowns.

Thanks to this strength, it decided to maintain its interim dividend of 4.93p per share, the same as in 2019. It had promised progressive dividend growth, so perhaps investors were disappointed this didn’t happen. Then again, when set against a background of FTSE 100 dividend cancellations, L&G’s maintained dividend is actually a blessing.

L&G shares are too cheap

Over the past 12 months, L&G shares are down around 8.6%. Also, they trade almost a third (31.3%) below their 52-week high of 324.7p, set on 13 December. Yet they are still almost two-thirds (61.6%) above their low of 138p set on 19 March, during the FTSE 100’s spring meltdown.

For me, L&G’s attractions are blatantly obvious: its shares are cheap and pay a handsome dividend. They trade on a price-to-earnings ratio of 7.25, for an earnings yield of 13.8%. The dividend yield is touching 8% and is covered more than 1.7 times by earnings. That headroom gives this FTSE 100 champion plenty of flexibility to increase future dividends.

For income-seeking and value investors, it’s hard to find a share more attractive than this FTSE 100 powerhouse, I feel. I regret selling my L&G shares 12 years ago – and I would buy and hold its shares today.

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Cliffdarcy 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.

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