Insurer and investment specialist Legal & General Group (LON: LGEN) is a company that I rate highly for its dividend prospects. It’s one of the top holdings in my personal dividend portfolio.
So, I was pleased to hear this week that the company is hiking its dividend again.
The FTSE 100 company released 2017 full-year results earlier this week. Operating profit climbed 32%, while adjusted earnings per share rose 9% to 23.1p. The group stated that its goal is to achieve EPS growth of 10% per year out to 2020.
CEO Nigel Wilson was upbeat about Legal & General’s performance and future prospects, stating:
“Legal & General’s strategic focus, alignment to global growth drivers and excellent execution, allowed us to deliver a record £2.1bn operating profit in 2017. Our shareholders are enjoying terrific EPS and ROE growth, while our ‘inclusive capitalism’ model ensures customers and society also benefit. We remain confident that our unique business model, strong management team, collaborative culture, and strategic focus can deliver further growth in 2018 and beyond.”
As a dividend growth investor, one of the first things I look for when a company reports, is an increase in the full-year dividend. I like to see growth in excess of inflation, ideally above 5%. To me, that’s a signal that the business is healthy.
Legal & General hiked its full-year payout by a solid 7%. I was happy with that. That now marks eight consecutive dividend increases since the company cut its payout during the Global Financial Crisis.
The 7% increase takes the payout for 2017 to 15.35p per share.
At the current share price of 263p, that equates to a trailing yield of 5.8%.
Dividend coverage, while not high, was sufficient at 1.5 times.
With that yield on offer and a very reasonable valuation (forward P/E 10.4), the company continues to be one of the best dividend stocks in the FTSE 100, in my opinion.
Disclosure: Edward Sheldon, CFA owns shares in Legal & General Group.
This article is provided for general information only and is not intended to be investment advice. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.