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While there’s uncertainty around the economy, I believe looking for stocks that provide passive income is a great option.
Legal & General (LSE:LGEN) is one company investors may want to consider buying shares in. With a dividend yield of 9.1%, its shares have the second-highest yield in the FTSE 100.
Let’s see how much a £5,000 investment would have made over the last 10 years.
So, how much?
I’m going to assume an investor put £5,000 into Legal & General shares at the start of May 2015. Back then, the shares were 260p each. Therefore, the investor would have been able to purchase 1,923 shares.
It’s important to note that investors wouldn’t have been able to receive the dividend paid in June 2015, as that went ex-dividend before May. The first dividend, of 3.45p per share, would therefore have been received in September 2015.
Over the next 10 years, the company paid 158.82p of dividends per share. For the 1,923 shares invested, that represents £2,053.54 (I haven’t included the upcoming payment in June of 15.36p per share that just went ex-dividend in my calculation).
That’s quite significant indeed. Of the initial investment, 41.1% has already been recovered, and we’d still have the value of the shares today, too.
It’s important to understand that just because Legal & General shares performed as such in the last 10 years, it doesn’t mean they will do so again. This is especially the case as dividends aren’t guaranteed.
However, this still provides useful insight into the additional income an investor could make from holding shares in a strong dividend stock.
Going forward
While it’s not easy to predict the dividend in the next 10 years, we can look at whether the company can maintain and grow its payout over the next couple of years.
Looking at the financial services firm’s history, it has a very strong track record. It has maintained or raised its dividend every year since 2009. The only year it didn’t raise it was in 2020 during the COVID pandemic.
Furthermore, when the firm released its 2024 annual report, it restated its intention to increase the dividend per share by 2% annually through to 2027.
Looking at its report, the firm has also been performing well. Its operating profit rose 6% to £1.6bn last year.
In the short term, I do see risks for the company. There’s a lot of uncertainty surrounding the economy, and unfortunately, being a financial services firm means its performance is usually in line with the wider economy.
For example, the US economy shrank by 3% in the first quarter of 2025, signalling it may enter a recession. This has historically been bad for the rest of the world, which could affect Legal & General’s earnings. Ultimately, this could threaten the dividend.
However, long-term investors shouldn’t be overly concerned about this. The business has a lot of potential catalysts for success. Notably, the ageing UK population will increase the need for retirement services. This happens to be the firm’s most profitable segment. It’s also already growing strongly, rising by 7% last year. Therefore, it should continue seeing solid growth in the future.
With all this in mind, I believe investors looking for income should consider Legal & General shares.
