Who?

With a current (10 April) yield of 8.4%, Legal & General’s (LSE:LGEN) shares are likely to be on the radar of income investors. However, experienced observers of the stock market know that high yields should be treated with caution.

A return nearly three times higher than that offered by the FTSE 100 could be a sign that the City’s expecting a cut. In effect, investors are demanding a premium for the perceived additional risk associated with owning stock in the savings and retirement group.

Personally, I think this is unjustified. Why? Well, history shows that Legal & General has an excellent track record of increasing its payout. Looking back over the past two decades, it kept it unchanged in 2020. It was last cut it in 2009 – the second year in a row — as a result of the global financial crisis. Otherwise, it’s been increases all the way.

Delving deeper

Of course, history may not be repeated. That’s because dividends are a distribution of profit, which means they can fluctuate in line with earnings. But a closer look at payments over the past two decades is revealing.

Maintaining the payout in 2020 – described as a “pause year” – was understandable given the uncertainty caused by the pandemic. And in 2008, the group reported a huge loss of £37.7bn on its investment portfolio. For context, its current market cap is £14.8bn.

In these circumstances, the group’s directors felt they had no alternative but to reduce its dividend. At the time, the group said financial markets were “left reeling after narrowly avoiding a systematic failure of the banking system and entering one of the sharpest, deepest recessions on record”.

This means that only in the most extreme circumstances has the group cut its dividend in the past 20 years. And during this period, we’ve had other economic downturns, Brexit, and a pandemic.

My view

Of course, there can never be any guarantees. But the group’s dividend looks safe for now. The current ceasefire in the Middle East has probably – if it holds – avoided a 2008-style market meltdown.

In 2025, the group reported a 9% increase in core operating earnings per share. It says it’s on course to increase its next two annual payouts by 2% a year. And it’s launched a £1.2bn share buyback programme.

However, there are a couple of things to keep an eye on. The group has signalled that it has a new target for its Solvency II ratio of 160%-190%. Okay, this is comfortably above the regulatory minimum of 100%. But it’s well below the 217% reported in June 2025.

And it operates in a competitive industry with challenger brands seeking to take market share.

But I think the group’s in pretty good financial shape. It’s continuing to secure a large number of pension schemes to manage from its large pipeline of potential new business. And its retirement division should do well as the State Pension age rises further.

In fact, I think it’s a top income share with an amazing yield that investors could consider.

The post An 8.4% yield! A dividend growth stock to consider stashing in a SIPP for decades? appeared first on The Motley Fool UK.

The life insurance and asset management business has a long track record of rewarding shareholders with dividends. In fact, when excluding the pandemic, Legal & General has raised shareholder payouts every year since 2010. And this trend has translated into the business having the highest yield in the entire FTSE 100 today at 8.6%.

With that in mind, it’s no wonder many investors see it as a top stock to buy. But I’ve spotted something that makes me nervous…

Impressive potential

Looking at the UK’s demographics, there’s an enormous incoming wave of retiring baby boomers, many of whom will soon be seeking pension and retirement solutions. And as interest rates steadily fall alongside inflation over the long run, the group’s asset management arm looks also primed to thrive, riding the tailwinds of rising equity valuations.

Of course, Legal & General isn’t the only business aiming to cash in on these potentially enormous tailwinds. However, one major advantage versus many of its peers is the group’s international exposure.

With its presence in the US as well as UK markets, the business is able to tap into multiple market opportunities to maximise its growth. And with that in mind, it’s not hard to understand why some investors see Legal & General as a mispriced quality compounder.

But this is where things get complicated…

Pressures on profits

While the group delivered a robust 9% expansion of core operating earnings in 2025, this growth was still insufficient to close the gap between profits generated and dividends paid.

Management’s internal forecasts suggest this is only a temporary problem, with dividend coverage being restored by 2027. But there are two primary issues with this projection:

1. It assumes that the market doesn’t suffer a major downturn.
2. It assumes that competition doesn’t eat away at profit margins.

Following the outbreak of war in Iran, the OECD has warned the UK is at risk of a major economic hit on the back of skyrocketing energy prices. And even in the US, economists and institutional analysts have increased their estimated odds of a potential recession.

Admittedly, this is a worst-case scenario. But even if the UK and US economies manage to avoid disaster, there’s still the question of rising competition.

With multiple insurance groups looking to cash in on the ongoing annuities gravy train, Legal & General is having to price more competitively, pressuring its profit margins to capture volume. And if competition continues to intensify, management could end up falling short of its targets.

That’s why multiple institutional analysts have started flagging Legal & General’s dividend as at risk of a cut.

The bottom line

If management is able to hit its promised performance targets, Legal & General shares are likely undervalued today. But given the macroeconomic backdrop, that’s a big if. And the risk of a payout cut is very real.

That’s why, despite its popularity, I’m not in a hurry to buy the shares today. Instead, I’m looking at other promising dividend stocks that offer a far more attractive risk-to-reward ratio.

The post 1 no-brainer dividend stock to buy for lifelong passive income? appeared first on The Motley Fool UK.

The ISA’s other tax benefits include protection from capital gains tax (CGT) when you sell shares, as well as dividend tax when you receive dividends. This is more important than ever — from the 2026/27 tax year, the rate of dividend tax is rising for millions of people. Those who invest outside the ISA wrapper face cash grabs from HMRC that can eat into long-term portfolio growth.

With these perks, investors can supercharge their chances of a large second income in retirement. But how much would they need for an annual passive income above £20,000?

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.

Just a tenner a month?

Times are tough in the UK as the cost-of-living crisis drags on. And things could get a lot more difficult if the Middle East crisis sparks again, pushing inflation higher and denting economic growth. It could lead to more of us having less to regularly invest.

But it’s no time to panic. If history has taught us anything, it’s that even those investing small amounts can build a large nest egg to retire on. Even a £10 daily cash injection can be enough.

A tenner a day works out at roughly £304 over the course of a month. Thanks to the power of the stock market, an investor putting this into a Stocks and Shares ISA could expect to make £340,821 after 25 years, assuming an average annual return of 9%. Dividends would also need to be reinvested.

Buying dividend stocks

Retirees have a variety of ways they can turn this into a regular income. They can buy an annuity policy, for instance, or draw down a percentage of their ISA.

But I think there’s a better way to make a passive income. What about using that ISA wealth to buy dividend shares? This leaves scope for further portfolio growth and a steady stream of cash for living expenses. If invested in dividend shares with 7% yields, that would generate an annual income of £23,857.

And here’s the thing: with no income tax due on withdrawals, every penny an ISA investor makes in dividends is theirs to keep.

A FTSE 100 share to consider?

Dividends are never guaranteed. But investors have a wide range of 7%-yielding stocks to choose from, helping them build a diversified portfolio to reduce the risk of income shortfalls.

Legal & General (LSE:LGEN) is one top share to consider. I actually hold it in my own portfolio for dividends. It’s raised annual payouts every year for 15 years, with the exception of pandemic-hit 2020. And even then it froze the dividend while hundreds of other global shares were cutting, postponing, or cancelling dividends.

This is the sort of dividend reliability I Iove. But can Legal & General shares keep it up, and especially as inflationary pressures rise again, hitting consumer spending? I’m confident they can — the firm’s balance sheet is rock solid, with a Solvency II capital ratio of 176%.

Looking longer term, I expect profits to rise strongly as the financial services market grows, driving dividends even higher.

The post How to turn £10 a day in a Stocks & Shares ISA into £23,857 of passive income! appeared first on The Motley Fool UK.

Making up 3.92% of buys, the shares narrowly edged ahead of BP‘s 3.88% and were almost twice that of Rolls-Royce.

But looking at the past year’s performance, some investors may be wondering why.

Even with dividends included, the stock has barely achieved a 35% total return — less than Rolls, BP, Shell, and even the overall FTSE 100.

So why does the company continue to command such a strong following?

A household name

Part of the answer is simple familiarity. L&G has been around since the 1830s and is a household name in pensions, annuities, and life insurance. Many UK savers already see its logo on workplace pensions or annuity paperwork, so buying the shares can feel like sticking with what they know.

Aside from AJ Bell, it regularly features near the top of many ‘most‑bought’ lists. Analysts often highlight the ‘irresistible’ income appeal of its consistently high yield. That kind of constant visibility helps keep it front‑of‑mind for retail investors.

The dividend story

Dividends are the real attraction. L&G’s forward yield is about 8.5%, the very highest in the FTSE 100 and far above the index’s roughly 3% average. So for every £1,000 invested, shareholders get a bonus £85 a year just for holding the shares.

Compared to BP’s 70% price gain in the past year, that may seem a little weak. But with a 42-year track record of payments, those regular dividends are far more reliable than a one-off rally. 

The payout has also grown steadily in recent years. The board has guided to 5% dividend growth for 2024 and then 2% a year from 2025 to 2027 (on top of share buybacks). For investors who want rising income in retirement, that combination of high starting yield plus modest growth is very appealing.

But is it sustainable?

Looking closer

L&G’s latest full‑year numbers showed core operating profit up about 6% and earnings per share (EPS) up 9%, with plans for a £1.2bn buyback – the largest in the group’s history.

Its Solvency II capital ratio — a key regulator‑defined strength measure — sits around 210%, giving management room to keep paying and growing the dividend if things go to plan.

Valuation is a bit trickier to unpack. Its trailing price‑to‑earnings (P/E) ratio looks high because reported profits have been distorted by market movements. But on forward estimates, the shares trade on a much lower multiple (around 11 times earnings), which is more in line with a mature but solid financial stock.

So, is it still worth a look?

Popular or not, Legal & General is by no means a risk-free stock. The fact that dividends account for so much of earnings is worrying: any small profit slip could derail payments, or hammer debt.

And considering how closely tied it is to global markets, that’s a real risk right now.

Still, it remains a compelling candidate in my book, albeit as part of a diversified portfolio rather than a single holding. Standard Life and M&G are two alternatives to consider – less established and more risky, but with a potentially higher reward.

And for the more risk-averse, I’ve also had my eye on several defensive shares lately…

The post This FTSE 100 dividend hero once again tops AJ Bell’s most-bought list appeared first on The Motley Fool UK.

This FTSE 100 giant has always been a UK favourite. But its popularity seems to be growing even bigger as retail investors rush to lock in the impressive 8.9% yield being paid out. And with a long track record of not only maintaining dividends but increasing them as well, this excitement’s quite understandable.

In fact, just to highlight how substantial Legal & General’s dividend policy is, over the last five years, the share price has actually fallen by close to 15%. Yet thanks to shareholder payouts, the actual return on investment is closer to +25%. And anyone who put £500 to work five years ago is now sitting on £627.

So the question now becomes, will Legal & General shares continue to be a winning investment in 2026 and beyond?

Reasons to consider buying

Looking at the underlying business, there are quite a few catalysts to get excited about as well. For example, one massive tailwind that many UK insurance and asset management groups have been capitalising on recently is the pension risk transfer (PRT) market.

Thanks to higher interest rates, higher payouts from financial products like Legal & General’s annuities have enabled corporate pension schemes to de-risk their future liabilities.

Subsequently, the business has seen a surge in demand. But unlike many of its peers, Legal & General’s PRT presence extends beyond just the UK and goes into the US market as well – an opportunity that’s estimated to be five times larger.

What to watch

While Legal & General’s annuities business is booming, it’s not a risk-free endeavour. The company is effectively taking on the liabilities of corporate pension schemes and using a portfolio of bonds and private credit assets to not only cover these liabilities but also try and profit from the excess return they generate.

The only trouble is, profit isn’t guaranteed. And if its investments underperform due to bond defaults or private credit impairments, Legal & General still has to pay the fixed amount promised as part of its annuities.

That’s a massive problem if a severe recession comes knocking, directly pressuring the health of the balance sheet as well as gobbling up its all-important Solvency II regulatory capital. And it’s why institutional investors have been a bit more reluctant to snap up shares.

Put simply, even though the dividends are currently covered, that could quickly change if economic conditions suddenly take a turn for the worse.

The bottom line

Legal & General has a long track record of navigating tough macroeconomic conditions, turning the business into a reliable compounding machine. But the last time the business had to endure a widespread crisis in 2008, dividends were aggressively cut – a risk that’s very real today if the geopolitical landscape continues to escalate.

With that in mind, conservative investors may want to look elsewhere for passive income opportunities. But for those with a higher risk tolerance, Legal & General shares could be worth a closer look, in my opinion.

The post £500 invested in Legal & General shares 5 years ago is now worth… appeared first on The Motley Fool UK.

With this in mind, here are five high-yielding shares that could unlock a magnificent income stream over the next 12 months.

A bit of a handful

The five in the table below are all FTSE 100 stocks, home to the UK’s most valuable listed companies with, generally speaking, the strongest balance sheets and most reliable earnings.

Although there can never be any guarantees when it comes to dividends, it means – in theory, at least – that their payouts should be among the most reliable around.

Their average yield is currently (2 April), 6.8%. If this is maintained, it means a £20,000 investment spread equally across all five could earn dividends of £1,360 over the next 12 months.

What about elsewhere?

Admittedly, there are plenty of stocks (apparently) offering a higher yield at the moment, including many outside the FTSE 100. But it always pays to look at the league tables closely as yields are usually quoted on a historic (trailing 12-months) basis.

A good example of this is Robert Walters. With a return in excess of 20%, the recruitment firm currently appears in the top three of high-yielding dividend stocks on the FTSE All-Share index. Although mathematically correct, the company has suspended its payout in the face of tough trading conditions. In reality, the stock’s now yielding zero.

A high yield could also be a sign that investors are expecting a cut.

Top of the pile

Returning to the five, the stock offering the highest return — and one that I have in my own portfolio — is Legal & General.

It has an excellent history of raising its dividend. However, a falling share price means its yield has risen steadily in recent years.

But acknowledging what I said earlier about high-yielding shares, I don’t think there are any immediate reasons to be concerned.

In 2025, its core operating earnings per share grew by 9% and it secured £11.8bn of new pension schemes to manage. By the end of the year, it had £1.2trn of assets under management, up £62bn.

However, its lacklustre share price remains a concern. Growth investors should probably look elsewhere.

And I think the fall in its Solvency II ratio is something to watch carefully. This is a measure of balance sheet strength and while the company retains over twice the level of reserves that regulators require, this measure fell from 232% to 202% during 2025.

But an ageing population and a greater awareness of the need for sensible retirement planning are likely to help it grow its top and bottom lines. Demand for annuities should also rise if interest rates remain higher for longer as a result of events in the Gulf region.

However, having last cut its payout in 2009, it’s Legal & General’s dividend that most appeals to me.

Final thought

I will have to do more research before deciding whether to buy any of the other five.

It’s best to think of them as a representative sample of the dozens of high-yielding shares that are currently available to investors, rather than as a shopping list. 

The post These 5 dividend stocks could generate 6.8% passive income over the next 12 months appeared first on The Motley Fool UK.

It’s been impossible to miss the emergence of artificial intelligence (AI). But there’s another dimension beyond OpenAI, software, and data centres.

Private credit

One of the areas that has been seeing pressure recently is private credit. In recent years, private equity firms have bought a lot of software companies. 

A lot of this has been done using loans – from private credit companies. There’s nothing wrong with this, but those loans are starting to mature. 

The trouble is, interest rates are higher than they were five years ago so refinancing is more expensive. And there’s another issue.

Software stocks have been under pressure. So the assets bought with those loans might not be worth enough to cover the outstanding debt.

That’s not a good situation. And while it sounds like an isolated issue, it might have major implications for the stock market as a whole.

Implications

Uncertainty in the private credit market is leading to higher redemptions. In some cases, funds have had to limit withdrawals. 

That, however, only increases the sense that there’s a problem. And the effects reach much further than just private equity.

One issue is that institutions like insurance companies often own private credit firms. So a wave of defaults might create issues for annuities.

Another concern is the potential for tighter lending standards. The trouble with this is that less credit availability could well lead to a recession.

In that situation, the stock market in general might well be vulnerable. And this is something I’m not sure ordinary investors are paying attention to.

Risks

This is one of the reasons I tend to stay away from stocks like Legal & General (LSE:LGEN). Investing is hard enough without making things worse.

The FTSE 100 company has been growing its annuity book recently. But a lot of this has been invested in private credit funds in the US. 

In 2025, the firm signed a deal to invest in private credit with Blackstone. So there’s definitely a risk that’s very hard for investors to assess accurately. 

Legal & General does have big solvency reserves to cover losses. And a dividend yield above 8% means investors get some compensation for the risks. 

Ultimately, though, I think investors should tread very carefully here. When the risk is hard to evaluate, there are usually better opportunities elsewhere.

The good news

Figuring out what to make of private credit right now is very difficult. But the good news for investors is that they don’t need to.

The only things investors really need to focus on are the stocks they own. And they need to be able to assess those businesses carefully.

That includes being prepared for a recession. But it doesn’t mean having a deep insight into the chances of one being imminent. 

The outlook for lending conditions is a key part of the outlook for some companies. Investors, however, don’t have to invest in those.

I think there are enough opportunities elsewhere at the moment. And these are where I’m continuing to focus my investing.

The post Is the stock market about to reach breaking point? appeared first on The Motley Fool UK.

Many investors can’t resist. The insurer and asset manager is one of Britain’s most bought blue-chips. I couldn’t resist myself, adding it to my SIPP in 2023. But there’s a catch. A sky-high yield is often the sign of a struggling share price, and that’s the case here. What investors have gained in income, they’ve sacrificed in growth.

Top FTSE 100 income stock

Some may be happy with that. If they’ve retired, and are drawing Legal & General’s juicy dividends as income, what happens to their capital may be less of an issue. Provided the income remains sustainable.

Even younger investors in the wealth-building phase may be content. Reinvested, that 8.55% yield would turn £10,000 into £22,714 over 10 years, even if the shares don’t grow at all. If they grow at an average of 3% a year, the total return would hit £29,833.

It’s worth pointing out that by targeting a high yield, investors are implicitly accepting lower growth. Every time the shares go ex-dividend, which in this case is twice a year, the share price falls to reflect the lost capital value of those shareholder payouts. When the yield is this big, the shares can fall markedly.

We’ve just had a good example of that. FTSE 250 housebuilder Taylor Wimpey now yields just over 11%. It went ex-dividend yesterday, and the shares fell 4.5%. Something similar will happen when Legal & General goes ex-dividend on 23 April.

Dividends and share buybacks

Yet high-income shares can still deliver growth. Wealth manager M&G and insurer Standard Life (formerly Phoenix Group) have both yielded close to 10% in recent years. Their shares are up 43% and 30%, respectively, over the last 12 months (they were doing better before the Iran-linked correction).

Legal & General shares have also climbed, but nowhere near as much. They’re up a modest 4.3% since the start of the financial year on 6 April 2025. Add in the trailing yield, and the total return is 12.9%. This would have turned £10k into £11,290. That’s not great, but given the recent correction, it’s not bad.

Long-term performance is worrying. The shares are down 10% over five years, and only a fraction above where they were a decade ago. Yet the dividend has been solid throughout. It’s risen every year since the financial crisis, with the exception of a freeze during the pandemic in 2020. The average annual compound growth rate is 10.7% over the last 15 years. However, future growth may be lower at 2%.

Last month, Legal & General also announced a record £1.2bn share buyback. It expects to return more than £5bn to shareholders between 2025 and 2027. Of course shareholder returns aren’t guaranteed, and the group is vulnerable to further stock market falls, which would hit the £1.2trn of assets it has under management.

I still think it’s worth considering for an income-focused investors, as part of a balanced portfolio. Who knows, we may see some price growth as well.

The post £10,000 invested in ultra-high yield Legal & General shares on 5 April last year is now worth… appeared first on The Motley Fool UK.

How large would your ISA need to be to deliver this kind of second income, though?

Let’s talk dividends

This depends on what your plan is once you retire. Do you plan to purchase an annuity, or draw down a percentage of your ISA each year? Perhaps a combination of both?

Let’s keep things simple, and assume you plan to buy dividend shares with your pension pot. It’s the plan I’m expecting to take. This way, I’ll have cash to cover living costs in the form of dividends. And by not depleting my nest egg over time, I can improve my chances of growing my capital too.

A £1,000 monthly income works out at £12,000 a year. To generate that kind of cash flow, an investor’s portfolio will need to be worth:

• £240,000, if invested in 5%-yielding dividend shares
• £200,000, if put into stocks with 6% dividend yields
• £172,000, if invested in 7%-yielding stocks
• £150,000, if spent on dividend shares with 8% yields

You can clearly see that the higher the yield, the smaller the ISA needs to be. So let’s rush out and buy the largest-dividend-yielding stock out there, right? For the FTSE 100, that’s currently Legal & General (LSE:LGEN).

The forward dividend yield here is 9.2%. For a £1,000 income from Legal & General shares, a Stocks and Shares ISA would need to be worth just £131,000.

A top ISA buy?

But here’s the thing. Putting all your eggs in one basket is a highly risky strategy. If the company you’re invested in hits trouble, the dividend income can dry up, putting your living standards at risk.

I hold Legal & General shares myself for dividends. Yields have been more than double the FTSE 100 average for years, which to me was too good to ignore. The huge income I receive is reinvested to supercharge my portfolio growth.

I’m confident it will continue performing well for me in retirement. The firm’s strong balance sheet gives it scope to keep paying impressive dividends even if profits come under pressure. Its Solvency II ratio sits at 210%, more than double regulatory requirements. Looking further out, I think rapid market growth will underpin large and growing dividends each year.

Targeting a £1k monthly income

But there’s no guarantee of this, of course. What about if regulatory capital requirements change, or competitive pressures rise, putting profits under pressure?

For this reason, Legal & General’s one of roughly 20 to 25 shares I hold in my portfolio. It’s a number I plan to keep, more or less, to fund my retirement. A 7%-yielding ISA worth £172,000 will be needed for a £1,000 monthly income, as I’ve said. This could be achieved by investing roughly £250 a month over 20 years with an average annual return of 8%.

The post How much do you need in a Stocks & Shares ISA for a £1,000 monthly second income? appeared first on The Motley Fool UK.

£88bn up for grabs

Analysts expect total dividend income from the FTSE 100 to hit an all-time high this year. The latest estimate is that Footsie firms will pay out a total of £88bn in cash to their owners in 2026.

What’s more, many big British businesses are buying back their own shares. So far in 2026, FTSE 100 companies have announced £29.4bn in share buybacks, nearly half of 2025’s total. Businesses buy back shares to shrink their future share bases, thus pushing up future earnings per share and dividends per share.

Overall, the total of ordinary dividends, special dividends, and share buybacks is expected to reach £118bn in 2026. This is the equivalent of almost 4.5% of the FTSE 100’s market value of £2.6trn. Whoa.

The trouble with dividends

Share dividends are my favourite form of passive income, but they are not risk-free. Most companies don’t make these payouts, with some preferring to reinvest their profits into future growth. That said, all but a few FTSE 100 firms pay out regular cash dividends.

Also, future dividends are not guaranteed, so they can be cut or cancelled at short notice. For instance, dozens of companies did this in the Covid-19 crisis of 2020/21.

An 8.6% yield from a household name

Right now, my family portfolio includes roughly 30 different individual US and UK shares. We bought a few of these for long-term growth, but most were acquired for their powerful passive income.

For example, take Legal & General Group (LSE: LGEN), the well-known UK provider of pensions, life insurance, and investment products. Founded in 1836, L&G has grown over almost two centuries into one of Europe’s biggest asset managers. Currently, it manages almost £1.2trn of other people’s money for millions of individual and institutional customers.

As I write, the L&G share price stands at 253.4p, valuing the group at nearly £14.4bn. The shares are up up only 3.6% over one year and have fallen 10.6% over five years. However, they offer a huge dividend yield of 8.6% a year — one of the highest in the London stock market. In contrast, the dividend yield for the wider FTSE 100 is just 3.1% a year.

For the record, my family portfolio bought L&G shares in mid-2022, paying 247p a share for our holding. To date, our paper gain is a mere 2.6%, but we bought this stock for its river of dividends. Instead of spending this cash, we use it to buy more L&G shares, increasing our company ownership. Also, L&G is spending £1.2bn on a huge share buyback programme, which will further boost our holding.

Of course, L&G’s fortunes are tightly tied to the future performance of financial markets. Should share and bond prices plunge again — as they did steeply in 2022 — then L&G’s revenues, earnings, and cash flow would suffer. Even so, we intend to keep our shares for their pumped-up passive income, come what may!

The post This massive passive income of £88bn is coming in 2026! appeared first on The Motley Fool UK.