£10,000 invested in Legal & General shares at the start of 2025 is now worth…

Legal & General (LSE: LGEN) shares are finally springing to life. Every FTSE 100-focused investor knows the insurer and asset manager offers a fantastic dividend yield, but growth has been scarce. Now it’s starting to show.

Could this be the year the Legal & General share price finally delivers?

I’ve a vested interest, because I hold the stock in my Self-Invested Personal Pension (SIPP). I love it when the twice-yearly dividend hits my SIPP, but the shares have lagged the two other high-yielding FTSE 100 financials I hold, M&G and Phoenix Group Holdings.

Exactly a year ago, I checked analyst forecasts for Legal & General and found brokers were predicting 12-month share price growth of 15%. Combined with a forecast yield of 9.5%, it meant Legal & General could deliver a total return of around 25%.

FTSE 100 passive income hero

I was cautious, dazzled by the yield but wary of what I called the “wafer-thin dividend cover of just 1.1 times earnings”. Yet with the board expecting to generate another £5bn-£6bn of capital by 2027, I decided the stock was worth considering.

Looking back, the brokers were surprisingly prescient. Legal & General shares are up 15.94% over the last year. Throw in the trailing yield of 8.04% and the total return comes to 23.98%, turning £10,000 into £12,398. Not bad, although hardly stellar. The FTSE 100 as a whole grew 21.5% last year. With a trailing 3.2% yield on top, it’s marginally ahead.

Also, Legal & General shares were well behind M&G and Phoenix, which both rose 45%. It’s the laggard in a booming sector. How come?

The company’s profits and revenues have been bumpy lately, with earnings per share (EPS) tanking for three years in a row, as my table shows.

Full-year 2024 results, published in March, weren’t all bad. They showed a 6% rise in core operating profit to £1.6bn. Investors also got £500m in share buybacks. Pensions risk transfers brought in £10.7bn, and the Solvency II ratio stood strong at 232%.

Mighty dividend yield

There was better news in October, when the board said it expects EPS to grow in full-year 2025, and at the higher end of its 6%-9% target. The current price-to-earnings ratio is a dizzyingly high 91, but as earnings rise that’s forecast to fall to a more reasonable 10.9 in 2026. The forecast yield is a mind-blowing 8.37%.

There are always risks. A wider market crash would hit Legal & General, as would any earnings miss. But as the shares gather momentum, I remain optimistic. Until I checked out broker forecasts for the year ahead. They produce a one-year share price target of around 265p. That’s roughly where the shares stand today.

I was hoping for more. No matter. Dividend income stocks like this are for the long term. I still think Legal & General shares are worth considering right now. The real benefit should come from holding them for years, allowing the dividends to compound while treating any share price growth as a welcome bonus.

The post £10,000 invested in Legal & General shares at the start of 2025 is now worth… appeared first on The Motley Fool UK.

More reading

• This crackerjack FTSE dividend stock now has a forecast yield of 8.9%!
• How much passive income could 1,909 Legal & General shares generate in 2026?
• With an 8.7% forecast dividend yield, is this top FTSE 100 passive income stock an unmissable bargain?
• £9,000 of savings? Here’s how it could be used to target a £3,419 second income
• How long would it take for an ISA to pay you £1,000 a month in passive income for life?

Harvey Jones has positions in Legal & General Group Plc, M&g Plc, and Phoenix Group Plc. The Motley Fool UK has recommended M&g Plc. 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.

See author's posts