How many Legal & General shares must an investor buy to earn £1k of monthly passive income?

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8 hours ago

The FTSE 100 is a brilliant source of passive income. Today, it's packed with dividend-paying blue-chip stocks including one of my favourites, Legal & General Group (LSE: LGEN).
This is a share I hold myself, and I'm dazzled by how much income it pays. It currently yields a stunning 8.45% – more than twice a best-buy savings account rate.
Even better, that figure should rise over time as Legal & General increases its shareholder payouts. It hiked its dividend by 5% to 21.36p per share in 2024 and now plans to lift it by 2% annually going forward.
That's a more modest increase – and below today's inflation rate – but it should help keep payouts sustainable. When yields get this high, there's always a risk the business can't maintain them.
By contrast, savings rates look set to fall, with central bankers expecting the Bank of England to cut base rates once or twice this year. So the income gap between shares and cash could widen.
Another benefit of investing in Legal & General is the chance of capital growth, if the share price rises. That's not guaranteed though. Shares can fall, unlike cash. Capital is at risk. But it's a potential bonus for those willing to take the risk.
Legal & General shares have underperformed overall. They're up just 12% over five years. However, in the last 12 months they've risen 13%. Add the yield and total one-year return hits 22%.
What happens next? Nobody knows. Analysts are guessing, though, with forecasts from 13 suggesting the share price could hit 267.8p within a year. That's an increase of 6% from today's 252.3p.
In 2024, core operating profits rose a solid but unspectacular 6% to £1.62bn. Analysts aren't expecting fireworks in 2025, and neither am I. Another year of steady growth would be fine by me, given that ultra-high income.
I think Legal & General shares are worth considering. Especially since the board is planning to return more than £5bn to shareholders over the next three years, through a mix of dividends and share buybacks.
Of course, there are no guarantees. Geopolitical tensions, like Israel and Iran's conflict, could spook markets. Trade tariffs could hurt too. With more than £1trn under management, Legal & General could see customer inflows and profits take a hit.
The board also needs to find new areas of revenue. While bulk annuities and infrastructure offer some hope, this is a mature and competitive market. Growth won't come easy.
Still, it's hard to ignore that income. So what if an investor took a big punt on Legal & General in a bid to generate £1,000 a month – £12,000 a year?
This year's dividend is forecast at 21.9p a share. To hit that income, they'd need 54,795 shares. At 252.3p each, that would cost roughly £138,702.
That's a huge amount to put into one stock. Unless our investor has a huge portfolio, it will break every diversification rule in the book. I wouldn't do it myself. On the other hand, £12k a year is a lot of income. It's a fraction more than the new State Pension, which pays a maximum £11,973 a year.
But my figures show just how powerful FTSE 100 shares can be when chasing long-term passive income.
The post How many Legal & General shares must an investor buy to earn £1k of monthly passive income? appeared first on The Motley Fool UK.
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Harvey Jones has positions in Legal & General Group Plc. 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.
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