New target as FTSE 100 high-yielder boosts confidence
This FTSE 100 insurer is finally firing after a long period when its chunky 8% dividend yield compensated for a lack of share price action. Is there further to go?
23rd June 2026 15:26
by Graeme Evans from interactive investor
Further upside for Legal & General Group (LSE:LGEN) shares has been flagged by a City bank as confidence builds in the high-yielding insurer’s ability to sustainably grow its dividend.
The FTSE 100-listed stock started today’s session at a four-year high of 286p, having delivered a year-to-date total shareholder return (TSR) of 14% so far this year.
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That’s well above the 4% TSR of the STOXX Europe 600 Insurance index, boosted by L&G’s efforts to return to having full cover of its dividend growth from operating cash.
City firm Berenberg believes this increased transparency with regard to the sustainability of the payout will lead to more investor engagement and to “a gradual re-rating”.
It has lifted its price target to 353p from 308p, which reflects the roll-forward of its valuation to take into account its 2028 earnings forecasts.
The bank also includes a half percentage point improvement in its price/earnings ratios, which takes into account the increased growth potential of the UK pensions and savings market.
The shares last topped 300p in early 2022, although with a dividend yield in the region of 8% investors have been well paid while they await a return to this milestone.
L&G has spent much of the past two years drifting between 220p and 260p a share before a 17% acceleration from the 245p seen in mid-May.
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In his 2024 strategy update, chief executive Antonio Simoes said a combination of 2% dividend growth and share buybacks would mean the company ends up distributing more than its previous policy of 5% dividend growth.
Berenberg notes that L&G’s £1.9 billion 2024-26 cumulative buyback programme should reduce the share count to 5.3 billion by the end of 2026, 11% below the level at the end of 2023.
Based on this drop and “relatively modest” 2% dividend growth from 2024-27, the bank estimates that the total cost of distribution is set to drop from £1.23 billion in the 2024 calendar year to about £1.18 billion in 2027.
It also highlights the fact that L&G said in 2025 results that it expects net surplus cash generation to cover the dividend by 2027.
In relation to forecasts, the bank has raised its expectations for 2028 net income by 6% to reflect confidence that L&G will achieve its target to boost operating profit from workplace pensions from £60 million in 2025 to £180 million by 2028.
The bank also referred to L&G’s strong margin discipline as well as the beneficial impact of a sustained level of interest rates.
It pointed out that L&G achieved a 27% market share in new pension risk transfer business in 2025, but that with increased competition this will drop to the lower end of the 20- 25% historical range in 2026.
Berenberg said: “We believe that this partly reflects L&G’s focus on margins rather than volumes, which is positive for value creation.”
Meanwhile, the UK 10-year government bond yield, which is the benchmark risk-free rate for UK life insurers such as L&G, has risen from 4.1% in 2024 to the current level of 4.8%.
It added: “This is positive for the company, as a 100 basis points higher level of risk-free rates adds 11% to L&G’s solvency.”
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