£10,000 of Legal & General shares would earn me an income of £623 every month!
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Legal and General Group's (LSE:LGEN) has been one of the FTSE 100The hottest dividend stocks in recent years.
Not only has the financial services giant increased annual payouts almost every year since the 2008/2009 financial crisis (as shown below), but its dividend yield has also averaged a Footsie during that time.
Assignments are never guaranteed. But there is good news for Legal & General shareholders like me. Analysts in the city offer the company to pay a large and growing dividend until 2026, at least.
I use an investment of £10,000 today, how much income can I make?
annual yield of 9.8%.
As an asset manager, life insurance and retirement product provider, profits here can be disappointing when buyers cut back and interest rates rise. Indeed, these factors have contributed to double-digit earnings declines in both of the past two years.
However, the company's rich balance sheet means that it has been able to maintain the benefits of the increase. In 2023, annual dividends on Legal & General shares rose 5% to 20.34p per share.
Encouragingly, City analysts think cash awards will continue to rise until at least 2026, as shown in the table below.
| A year | Dividends per share | Share growth | Return yield |
|---|---|---|---|
| 2024 | 21.32p | 5% | 9.3% |
| 2025 | 21.83p | 2% | 9.5% |
| 2026 | 22.36p | 2% | 9.8% |
These predictions are in line with the Legal & General programs. And as you can see, share gains are outperforming the historical FTSE 100 going forward by an average of 3-4%.
I expect profits to continue to rise this time. But even if dividends fail to grow beyond 2026, an investment of £10,000 would still give me a monthly income of over £600.
£623 per month
If the broker's estimates are correct, I could make £980 in dividends by 2026, and £9,800 in ten years. Over 30 years, I would enjoy an income of £29,400.
But I can make even more if I reinvest these shareholder payouts. Thanks to the mathematical miracle of compounding, after 10 years, I would have generated £16,539 in dividends.
And after 30 years, I would have made a total income of £176,913, more than that. six times £29,400 I could have made without reinvesting.
After adding my £10,000 initial investment, my portfolio will be worth £186,913 (assuming no share price growth). If I put down 4% each year, I would have an annual income of £7,477 and a monthly income of £623.
Top pick?
Legal & General's share price has struggled since late 2022, as shown above. This reflects the impact of high interest rates – which remain a threat going forward – on their trading performance.
However, over the next 30 years, I expect the business to deliver healthy dividend returns again high dividend yield, driven by changing demographics. And so I would have a much larger income to live on than the £623 mentioned above.
As long as Legal & General's balance sheet remains strong, it will be able to continue to pay large dividends and invest for growth. Things are looking pretty good right now, with the company aiming to make more than £5bn-£6bn between 2025 and 2027.
I think shares of Legal & General are worth considering for diversification investors.
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