The FTSE 100 index is home to a handful of companies boasting attractive yields and robust dividend policies.
Consisting of the UK’s 100 largest companies listed on the London Stock Exchange, it’s ideal hunting ground for investors looking to earn passive income by way of dividend payments.
Among several contenders, one stock in particular stands out to me. In fact, I’m convinced it deserves to be considered as one of the best 8% yielders on the FTSE 100.
An international player in pension risk transfer
Established in 1836, Legal & General (LSE:LGEN) is a leading financial services group and major global investor. Its mission statement is to safeguard people’s financial futures around the world.
The group’s five businesses together cover the four key areas in which Legal & General aims to be a market leader. This includes retirement, investment management, capital investment, and insurance.
In successfully providing retirement and protection solutions over the years, the company has grown to become one of the world’s largest asset managers.
Robust financial performance
Building upon its impressive long-term track record, I think Legal & General’s recent financial performance is testament to its resilience and strategic prowess.
Last month it reported a solid set of first-half results. For instance, operating profit stood at £941m for the period, slightly below the £958m recorded in the first six months of 2022.
Alongside that, the company’s Solvency II coverage ratio (a critical benchmark for the financial health of insurance companies) stood at a healthy 230%, showcasing a surplus of £9.2bn.
Combined with the fact that capital generation is exceeding dividend payouts, the financial services provider has plenty of cash to support what is an outstanding dividend yield.
The best 8% yielder
And with that eye-watering 8.5% yield, I’m willing to bet that Legal & General is near the top of a lot of income-seeking investors’ watchlists.
What’s more, amid the reporting of its half-year results in August, the company declared an interim dividend distribution of 5.71p. This represents a 5% increase over last year’s first-half dividend of 5.44p.
What I particularly admire about the group is its commitment to a generous and long-term dividend strategy.
To illustrate, the board recently signalled its intention to maintain 5% annual growth in the dividend until 2024. That’s great news for investors seeking passive income.
Challenges lie ahead
That said, I see a number of risks associated with Legal & General, many of which are inherent in the business, arising from its products, investments, and even the business environments in which the group operates.
For example, the company invests in a range of assets including equities, bonds, and property to meet the obligations from its long-term life insurance business.
Consequently, there is always the risk that the income and value of these investments may underperform relative to required targets.
Nonetheless, the group’s robust approach to risk management is reassuring to me. That’s especially since it prioritises supporting informed risk taking across the whole business.
For this reason, if I had some extra funds lying around, I’d eagerly scoop up some shares.
The post Why I’m convinced this dividend stock is the best 8% yielder on the FTSE 100 appeared first on The Motley Fool UK.
5 Shares for the Future of Energy
Investors who don’t own energy shares need to see this now.
Because Mark Rogers — The Motley Fool UK’s Director of Investing — sees 2 key reasons why energy is set to soar.
While sanctions slam Russian supplies, nations are also racing to achieve net zero emissions, he says. Mark believes 5 companies in particular are poised for spectacular profits.
Open this new report — 5 Shares for the Future of Energy — and discover:
Britain’s Energy Fort Knox, now controlling 30% of UK energy storage
How to potentially get paid by the weather
Electric Vehicles’ secret backdoor opportunity
One dead simple stock for the new nuclear boom
Click the button below to find out how you can get your hands on the full report now, and as a thank you for your interest, we’ll send you one of the five picks — absolutely free!
Grab your FREE Energy recommendation now
setButtonColorDefaults(“#5FA85D”, ‘background’, ‘#5FA85D’);
setButtonColorDefaults(“#43A24A”, ‘border-color’, ‘#43A24A’);
setButtonColorDefaults(“#FFFFFF”, ‘color’, ‘#FFFFFF’);
})()
More reading
I’d buy 6,000 shares of this FTSE 100 stock for £100 in monthly passive income
If I’d invested £1,000 in Legal & General shares a year ago, here’s what I’d have today
3 stocks I’m considering buying for a second income!
For me, this FTSE 100 share is a no-brainer buy!
3 ridiculously cheap shares I’d buy now for mouth-watering passive income
Matthew Dumigan has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.
