With a forecast dividend yield of 8.7%, is this top FTSE 100 income stock a foolproof profit?
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Based on the current (January 5) share price of 262.4p, and dividends paid in the last 12 months of 21.48p, Legal & General‘s (LSE:LGEN) stock is yielding 8.2%. Currently, it ranks highest in the UK’s top 100 listed companies.
However, such a good yield could be a sign that investors have their doubts that the payment will be maintained. For continuing to hold shares in the financial services group, they are seeking a higher premium.
As the table below shows, the stock has offered an above-average dividend for the past decade, but a struggling share price has pushed its yield to a high over the past four years or so.
| Fiscal year | The dividend (pence) | Share the price (pence) | Express (%) |
|---|---|---|---|
| 31.12.15 | 13.40 | 267.80 | 5.0 |
| 31.12.16 | 14.35 | 247.60 | 5.8 |
| 31.12.17 | 15.35 | 273.30 | 5.6 |
| 31.12.18 | 16.42 | 231.00 | 7.1 |
| 31.12.19 | 17.57 | 303.00 | 5.8 |
| 31.12.20 | 17.57 | 266.20 | 6.6 |
| 31.12.21 | 18.45 | 297.50 | 6.2 |
| 31.12.22 | 19.37 | 249.50 | 7.8 |
| 31.12.23 | 20.34 | 251.10 | 8.1 |
| 31.12.24 | 21.36 | 229.80 | 9.3 |
It’s going up again
The group’s directors have stated that their goal is to increase wages by 2% per year from 2025-27. No wonder analysts reflect this in their predictions. If their estimates prove correct, the forward yield (2027) is 8.7%, assuming the share price remains unchanged.
| Fiscal year | Forecast shares (pence) | Suggested yield (%) |
|---|---|---|
| 31.12.25 | 21.79 | 8.3 |
| 31.12.26 | 22.23 | 8.5 |
| 31.12.27 | 22.74 | 8.7 |
But if the company’s earnings were to decrease, its dividends may be reduced. However, in my opinion, Legal & General looks to be in a good position to increase its profits in the coming years.
That’s because it has a strong balance. One strength figure is the Solvency II ratio. This is the European Union’s standard measure of the financial strength of the insurance industry. On June 30, 2025, the statutory and general were 217%. By 2024, the average for UK companies in the sector was 194%.
Low share price performance
Especially with its high yield, I think the stock is one to consider. There is no one else in the FTSE 100 it offers a return of more than 8%. However, there are challenges, which may limit the value of the group’s shares. And these same risks may explain its low share price performance in recent years.
The Group operates in an increasingly competitive industry. Smaller new entrants have a lower cost base, which means they can provide cheaper services than their larger competitors.
Also, the group’s balance sheet contains more than £500bn of shares, bonds, and investment property. As the group itself admits: “Performance and investment market conditions in the broader economy may have an adverse effect on earnings, profits or capital gains.“
But I always have hope. The group has a large portfolio of pension schemes that it is looking to acquire and manage.
And during the six months ended June 30, 2025, core earnings per share increased 9% compared to the prior year. The company’s directors reaffirmed their commitment to deliver £5bn in dividends and share buybacks until 2027.
At the end of 2019 – when the group’s shares changed hands for more than £3 – it was worth just over £18bn. Today, its market capitalization is £14.9bn.
Since then, changes in accounting standards have made like-for-like comparisons difficult. But the group’s investment value is almost the same as it was and, on 31 December 2019, its Solvency II ratio was 177%.
In other words, I think it’s in better shape now than it was six years ago. This makes it more likely that it will continue to increase its dividends and could be an indication that its shares are undervalued. In this case, I think the shares of Legal & General should be considered.
