Canada Markets closed
  • S&P/TSX

    18,861.36
    -217.28 (-1.14%)
     
  • S&P 500

    3,825.33
    +39.95 (+1.06%)
     
  • DOW

    31,097.26
    +321.83 (+1.05%)
     
  • CAD/USD

    0.7762
    -0.0006 (-0.0776%)
     
  • CRUDE OIL

    108.46
    +2.70 (+2.55%)
     
  • BTC-CAD

    24,705.22
    -1,477.91 (-5.64%)
     
  • CMC Crypto 200

    420.84
    +0.70 (+0.17%)
     
  • GOLD FUTURES

    1,812.90
    +5.60 (+0.31%)
     
  • RUSSELL 2000

    1,727.76
    +19.77 (+1.16%)
     
  • 10-Yr Bond

    2.8890
    -0.0830 (-2.79%)
     
  • NASDAQ

    11,127.84
    +99.11 (+0.90%)
     
  • VOLATILITY

    26.70
    -2.01 (-7.00%)
     
  • FTSE

    7,168.65
    -0.63 (-0.01%)
     
  • NIKKEI 225

    25,935.62
    -457.42 (-1.73%)
     
  • CAD/EUR

    0.7439
    +0.0031 (+0.42%)
     

Legal & General Group's (LON:LGEN) Dividend Will Be Increased To UK£0.13

  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
·2 min read
In this article:
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.

The board of Legal & General Group Plc (LON:LGEN) has announced that it will be increasing its dividend by 5.0% on the 1st of June to UK£0.13. This will take the annual payment from 7.1% to 7.1% of the stock price, which is above what most companies in the industry pay.

Check out our latest analysis for Legal & General Group

Legal & General Group's Payment Has Solid Earnings Coverage

A big dividend yield for a few years doesn't mean much if it can't be sustained. Prior to this announcement, Legal & General Group's earnings easily covered the dividend, but free cash flows were negative. Since a dividend means the company is paying out cash to investors, this could prove to be a problem in the future.

EPS is set to fall by 3.5% over the next 12 months. Assuming the dividend continues along recent trends, we believe the payout ratio could be 59%, which we are pretty comfortable with and we think is feasible on an earnings basis.

historic-dividend
historic-dividend

Legal & General Group Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2012, the dividend has gone from UK£0.048 to UK£0.18. This means that it has been growing its distributions at 15% per annum over that time. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.

The Dividend Looks Likely To Grow

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. It's encouraging to see Legal & General Group has been growing its earnings per share at 12% a year over the past five years. While on an earnings basis, this company looks appealing as an income stock, the cash payout ratio still makes us cautious.

In Summary

Overall, we always like to see the dividend being raised, but we don't think Legal & General Group will make a great income stock. While Legal & General Group is earning enough to cover the payments, the cash flows are lacking. Overall, we don't think this company has the makings of a good income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Case in point: We've spotted 2 warning signs for Legal & General Group (of which 1 shouldn't be ignored!) you should know about. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Our goal is to create a safe and engaging place for users to connect over interests and passions. In order to improve our community experience, we are temporarily suspending article commenting