Down 8% in a month and yielding 9%! Is the Legal & General share price a no-brainer buy?

The Authorized & Basic (LSE: LGEN) share value is a little bit of a letdown. During the last 12 months it’s up simply 4%. Over the identical interval, the FTSE 100 grew virtually 12%, roughly 3 times as a lot.

The asset supervisor and insurer has risen 32% over 5 years, however nonetheless trails the UK blue-chip index, which grew virtually 60%. Share value development isn’t every thing in the case of investing, particularly in a inventory that comes with a king-size trailing yield of 9.3%. However it will be good to see some motion.

Reinvesting dividends for development

I truly acquired my newest payout at present (26 September). I bought 6.12p for every of the two,096 shares I maintain, which handed me simply over £128. Reinvested, that ought to purchase me one other 54 shares, lifting my complete to 2,150. The ultimate 2025 cost subsequent June must be larger, at round 15.87p per share. That may add one other £341 to my tally and raise my 12-month passive revenue complete to £470.

Producing common dividends and reinvesting them like it is a highly effective technique to constructing long-term wealth. However I nonetheless need that development. Traders in FTSE 100 rival Aviva bought that pleasure. Its shares have climbed 36% over one 12 months and 150% over 5.

Authorized & Basic’s first-half outcomes on 6 August regarded encouraging, with core working earnings rose 6% to £859m, and IFRS pre-tax earnings jumped 28% to £406m. The enjoyment was short-lived although. Only a week later, JP Morgan downgraded the inventory to Impartial from Chubby citing valuation pressures, risky funding returns, and rising competitors within the pension threat switch market.

I’m a bit involved to see the dividend is roofed simply as soon as by earnings. Ideally, it must be nearer to 2. Even so, administration stays dedicated to returning greater than £5bn to shareholders over three years by dividends and share buybacks.

The steadiness sheet regarded regular, with a solvency ratio of 217% and internet debt right down to £3.39bn from £4.71bn. So, I’m inclined to assume the revenue is safe, however this stuff are by no means assured.

Risky revenues and earnings

As my desk exhibits, revenues, earnings, and earnings per share (EPS) have all been very bumpy recently. Which matches a protracted technique to explaining latest underperformance.

Authorized & Basic’s price-to-earnings ratio is eye-watering at round 80, however the ahead P/E is a much more palatable 12.8, dropping to eight.8 in 2026. Forecasts recommend the inventory will yield 9.44% by then, which is an attractive prospect. Analyst consensus factors to a 12-month goal of 262p, some 10.5% increased than at present’s value. Issue within the yield and the overall return might method 20% however, once more, no ensures.

The group continues to be crying out for the form of overhaul Aviva has loved underneath CEO Amanda Blanc. A £20bn firm with greater than £1trn of property underneath administration shouldn’t be left to float indefinitely.

I wouldn’t name it a no brainer purchase however with the shares dropping 8% within the final month, I feel it’s nicely value contemplating for income-focused traders prepared to take the long-term view.