[date-today format='F j, Y']

This FTSE 100 firm offers an inflation-beating dividend for my Stocks and Shares ISA

This FTSE 100 stock offers an attractive 6.7% dividend, making it an appealing option for my Stocks and Shares ISA as inflation rates soar in...
worm's eye-view photography of ceiling
Photo by Joshua Sortino

I’m always on the lookout for stocks offering inflation-beating dividend for my Stocks and Shares ISA. I consider shares offering passive income a core part of my portfolio. Their dividend payments provide me with a regular and predictable source of revenue.

This is particularly true right now as inflation rates in the UK soar to levels not seen in decades. The Office for National Statistics reported this week that inflation had risen to 6.2% in February, up from 5.5% in January.

Inflation-beating dividend

This is why Legal & General (LSE:LGEN) has caught my eye recently. The FTSE 100 firm is currently offering an attractive, inflation-beating 6.7% dividend yield on the back of a 39% rise in annual pre-tax profits. And despite the recent upturn in the share price, it’s still trading at a discount compared with January. This means there could still be some further upside potential. 

The multinational financial services firm raised its dividend in early March, noting the business had benefitted from the post-pandemic economic recovery and easing of Covid-19 restrictions. Full-year accounts showed that post-tax profit was up 28% to £2.05bn, exceeding £2bn for the first time.

Legal & General’s price-to-earnings (P/E) — a ratio for valuing a company that measures its current share price relative to its earnings per share (EPS) — stands at eight, implying the business could be considered cheap. By comparison, competitor Prudential PLC has a P/E ratio of 14.2, suggesting that Legal & General, at least on face value, offers better value for money. Equally, it may mean that investors believe Prudential offers better future earning potential.

L&G risks

While Legal & General may appear cheap and offers an attractive dividend yield, there are always risks. For one, the London-headquartered firm could have a stronger dividend coverage ratio. In 2021, the dividend coverage ratio stood at 1.85, meaning the firm could pay the stated dividend nearly two times from its net income. The figure is far above the 1.26 from 2020, but a ratio above two would be healthier.  

The insurer also doesn’t have a great record for share price growth, having grown less than 1% in the last year compared with the time of writing. Long-term growth has been relatively slow too. The share price is up less than 10% over the last five years. Some of this can be put down to the volatility caused by Putin’s invasion of Ukraine, which sent share prices tumbling, but in general the long-term trend isn’t overly positive. 

It also seems likely that the invasion will have an impact on the company’s balance sheet as Legal & General, like many others, rushed to sell off its holdings in Russian stocks following the invasion of Ukraine. 

The bottom line

Despite these issues, I still think Legal & General looks like a great buy for my Stocks and Shares ISA. I believe the firm represents good value for money, and the passive income from its dividend yield could help my portfolio navigate soaring inflation. 

The post This FTSE 100 firm offers an inflation-beating dividend for my Stocks and Shares ISA appeared first on The Motley Fool UK.

Inflation Is Coming: 3 Shares To Try And Hedge Against Rising Prices

Make no mistake… inflation is coming.

Some people are running scared, but there’s one thing we believe we should avoid doing at all costs when inflation hits… and that’s doing nothing.

Money that just sits in the bank can often lose value each and every year. But to savvy savers and investors, where to consider putting their money is the million-dollar question.

That’s why we’ve put together a brand-new special report that uncovers 3 of our top UK and US share ideas to try and best hedge against inflation…

…because no matter what the economy is doing, a savvy investor will want their money working for them, inflation or not!

Best of all, we’re giving this report away completely FREE today!

Simply click here, enter your email address, and we’ll send it to you right away.

More reading

2 UK shares to buy now with 6% yields
3 dirt-cheap FTSE 100 shares I’d buy for powerful passive income
2 dividend shares to buy now with 6%+ dividends
I’m buying dirt-cheap FTSE 100 stocks and holding them for the long term
An inflation-busting FTSE 100 income stock with growth potential too

James Fox has no position in any of the shares mentioned. 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.





© 2022 The Daily Encrypt. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Latest News