Legal & General (LSE: LGEN) has gained popularity among UK investors for generating passive income through dividends. With a history of offering substantial yields, many are speculating about the potential income from their shares in 2026.
2026 Passive Income Forecast
In 2025, Legal & General distributed two dividends: a final payment of 15.36p per share on June 5 and an interim payment of 6.12p per share on September 26. This totals 21.48p per share. The company aims to increase its dividends by 2% annually. This projected growth results in an expected payout of 21.9p per share for 2026.
Investment Calculation
To estimate passive income based on a £10,000 investment, consider the share price. If an investor buys shares at £2.55, they would acquire around 3,921 shares. Multiplying the number of shares by the anticipated dividend per share yields approximately £859 in passive income for the year 2026.
Risks to Consider
While the forecasted income is appealing, potential investors should be aware of several risks:
- Dividend Reliability: Dividends are not guaranteed and may be reduced or eliminated based on earnings.
- Dividend Coverage Ratio: Currently, Legal & General’s dividends exceed earnings, resulting in a low coverage ratio.
- Share Price Volatility: The stock price may fluctuate due to market conditions, which could impact returns.
- Long-Term Underperformance: Historical data shows that Legal & General’s share price has lagged behind major indices over the past decade.
- Operational Risks: Poor performance in any division may lead to lower-than-expected profits, affecting dividend payments.
Investment Alternatives
Given the current low dividend coverage and Legal & General’s long-term performance, investors might want to explore other options. While the shares could still be considered for a diversified income portfolio, potential investors should weigh the risks carefully against other investment opportunities that might yield higher returns over the next five years.
