Legal & General (LSE: LGEN) shares have faced challenges over the past five years but currently present an intriguing investment opportunity. With a significant forecast dividend yield of 8%, the sentiment surrounding the stock is beginning to shift positively.
Current Market Analysis
The investment management sector, where Legal & General operates, often shows vulnerability during economic downturns. Recently, the stock has displayed resilience, particularly amid geopolitical tensions in the Middle East. In March, during a notable dip, Legal & General shares reverted to their late 2025 levels. However, as tensions ease, the share price has moved back towards its 52-week high.
Comparative Performance with Peers
While Legal & General’s dividend yield stands out, its stock performance has lagged behind competitors Aviva and M&G. A brief comparison reveals:
- Legal & General: 8% forecast dividend yield
- Aviva: 6.1% forecast dividend yield
- M&G: 6.8% forecast dividend yield
Historically, all three companies showed similar stock performance until about a year ago. Recent trends indicate that Legal & General has outperformed its peers in the past month, particularly with the ongoing Iran conflict influencing market dynamics.
Dividend Considerations
While the current dividend yield is attractive, concerns remain regarding the company’s ability to sustain these dividends. In 2025, Legal & General’s earnings covered only 44% of its dividend payments. Comparatively, Aviva and M&G managed to cover slightly more than 60% of theirs.
Future Earnings Projections
Forecasts for Legal & General indicate a potential decline in earnings between 2026 and 2028. Conversely, analysts project an uptick in earnings for Aviva and M&G, raising concerns about Legal & General’s growth prospects. This situation underlines the cyclical nature of such stocks, where small fluctuations in earnings can significantly impact dividend sustainability.
Dividend Stability
Despite potential risks, it’s worth noting that Legal & General has not reduced its dividend in the last decade. M&G has maintained this consistency as well, although Aviva shareholders experienced a dividend cut in 2019 as part of a restructuring strategy.
In conclusion, while Legal & General shares may currently represent a viable investment option, potential investors should carefully consider the financial forecasts and competition in the investment management sector before making their decision. Is now the ideal time to buy Legal & General shares? The answer may depend on individual risk tolerance and market outlook.
