Over the past 10 years Legal & General Group Plc (LON:LGEN) has grown its dividend payouts from £0.041 to £0.16. With a market cap of UK£14b, Legal & General Group pays out 53% of its earnings, leading to a 7.0% yield. Let me elaborate on you why the stock stands out for income investors like myself.
What Is A Dividend Rock Star?
It is a stock that pays a stable and consistent dividend, having done so reliably for the past decade with the expectation of this continuing into the future. More specifically:
- It is paying an annual yield above 75% of dividend payers
- It consistently pays out dividend without missing a payment or significantly cutting payout
- Its has increased its dividend per share amount over the past
- It is able to pay the current rate of dividends from its earnings
- It is able to continue to payout at the current rate in the future
High Yield And Dependable
Legal & General Group's dividend yield stands at 7.0%, which is high for Insurance stocks. But the real reason Legal & General Group stands out is because it has a proven track record of continuously paying out this level of dividends, from earnings, to shareholders and can be expected to continue paying in the future. This is a highly desirable trait for a stock holding if you're investor who wants a robust cash inflow from your portfolio over a long period of time.
Reliability is an important factor for dividend stocks, particularly for income investors who want a strong track record of payment and a positive outlook for future payout. In the case of LGEN it has increased its DPS from £0.041 to £0.16 in the past 10 years. It has also been paying out dividend consistently during this time, as you'd expect for a company increasing its dividend levels. This is an impressive feat, which makes LGEN a true dividend rockstar.
The company currently pays out 53% of its earnings as a dividend, according to its trailing twelve-month data, which means that the dividend is covered by earnings. In the near future, analysts are predicting a payout ratio of 56% which, assuming the share price stays the same, leads to a dividend yield of 8.0%. Moreover, EPS should increase to £0.34.
When thinking about whether a dividend is sustainable, another factor to consider is the cash flow. A company with strong cash flow, relative to earnings, can sometimes sustain a high pay out ratio.
Investors of Legal & General Group can continue to expect strong dividends from the stock. With its favorable dividend characteristics, if high income generation is still the goal for your portfolio, then Legal & General Group is one worth keeping around. However, given this is purely a dividend analysis, you should always research extensively before deciding whether or not a stock is an appropriate investment for you. I always recommend analysing the company's fundamentals and underlying business before making an investment decision. I've put together three key aspects you should further examine:
- Future Outlook: What are well-informed industry analysts predicting for LGEN’s future growth? Take a look at our free research report of analyst consensus for LGEN’s outlook.
- Valuation: What is LGEN worth today? Even if the stock is a cash cow, it's not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether LGEN is currently mispriced by the market.
- Other Dividend Rockstars: Are there strong dividend payers with better fundamentals out there? Check out our free list of these great stocks here.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.