Legal & General Dividend Yield of 7.7% Backed by £1.2bn Buyback

The London Stock Exchange (LSE)-listed Legal & General dividend yield of 7.7% sits at the top of the FTSE 100 income table, and the group’s latest full-year results give that yield more structural support than a simple payout ratio would suggest. At current prices, 173 shares in Legal & General (LGEN) cost £498.24 and produce an estimated £38.46 in annual income.

What the Full-Year Numbers Actually Show

When L&G reported its 2025 full-year results on 11 March 2026, the headline figures were solid across the board. Core Operating Profit came in at £1,623m, up 6%, while core earnings per share rose 9%. Solvency II capital generation reached £1.5bn, up 5% year-on-year.

The dividend per share for FY2025 was 21.79p, up 2%, in line with the group’s stated policy. Alongside those results, the board announced a £1.2bn share buyback, described as the largest in the company’s history, to begin immediately. Combined with planned dividends, L&G expects to return more than £5bn to shareholders across 2025 to 2027.

On capital strength, the pro forma Solvency II coverage ratio, adjusted for the Meiji Yasuda transaction and the related £1bn buyback, stood at 210%. The industry regulator requires companies in the sector to hold a minimum coverage ratio of 100%, so L&G is running at more than twice that threshold. The group manages £1.2 trillion in total assets, of which c.43% is international.

The 2026 guidance is worth examining closely. The snippet references a 6%-9% target range for core EPS growth; the FY2025 results presentation slides are more specific, stating ‘2026 Core Operating EPS growth of 9%’ as the group’s declared target for that year. The 6%-9% is the broader three-year range; 9% is the point target for 2026.

The Meiji Yasuda Deal and What It Means for the Legal & General Dividend Yield

In February 2025, L&G announced the sale of its US protection business to Meiji Yasuda, together with a 20% stake in its US pension risk transfer business, for a combined equity value of $2.3bn (£1.8bn at the time of announcement). L&G retains 80% of existing and new PRT through reinsurance arrangements, preserving exposure to a business it expects to grow.

As part of the transaction, Meiji Yasuda intends to acquire a c.5% shareholding in L&G through market purchases. The deal is expected to return the equivalent of c.40% of L&G’s market capitalisation to shareholders over 2025 to 2027, combining dividends and buybacks. The H1 2025 results confirmed momentum was holding: core operating EPS was 10.94p, up 9%, and the Solvency II coverage ratio at that interim stage was 217%.

The Institutional Retirement business wrote £11.8bn of global pension risk transfer in FY2025, with £10.4bn of that in the UK, where demand for bulk annuities remains elevated in the higher interest-rate environment.

Running the Compounding Numbers

The case for LGEN as an income compounder rests on reinvesting the dividend rather than spending it. At a steady 7.7% annual return, a single £500 investment grows as follows:

The annual income figures in the table are derived by applying the 7.7% yield to the portfolio value at each interval. After 40 years the pot is approaching £10,000, paying out £748 a year. A lump sum of £10,000 instead of £500 would be worth £194,370 at the same point.

For those without a large upfront sum, supplementing £500 with £100 a month at 7.7% would reach £297,048 after 40 years, generating annual dividend income of £22,873. The arithmetic requires consistent reinvestment and a yield that holds at current levels, neither of which is guaranteed.

Where the Thesis Could Break

Dividends are not contractual obligations. If a market downturn hit L&G’s £1.2 trillion asset base hard, or competition compressed margins in institutional retirement, the payout could be reduced. The group’s investment portfolio carries duration risk in a volatile rate environment, and its heavy exposure to UK defined-benefit pension schemes means it is not immune to sudden shifts in gilt markets.

The Solvency II cushion at 210% provides meaningful headroom, and the Meiji Yasuda deal has further concentrated the group on businesses with stronger structural growth. The next read on whether the 9% EPS target for 2026 is on track comes with the H1 2026 results, which will also confirm whether the buyback pace is being maintained.