There’s no pleasing some. As half of the Footsie is slashing its dividends, Legal & General doles out the same divi as last year but still gets a share price clobbering.
L&G has had a good war. Profits were only down slightly in the Covid half-year and it has a strong position in markets that do well with ageing populations.
That’s why chief executive Nigel Wilson has kept paying dividends despite the warnings from City watchdogs that insurers shouldn’t. Today, he declared a 4.93p interim payment yet watched as investors howled that he could have been more generous. The shares fell 3%.
That’s unfair for a business that saw Covid-19 make barely a dent on its earnings. A £129 million pandemic hit is chicken feed out of a £1.13 billion profit. Besides, a chunk of it was due to the impact on L&G’s returns of the lockdown on housebuilding. That ended months ago, so L&G’s income was merely delayed, not cancelled.
You could fret that life insurance claims in the US are higher due to the awful toll of Covid, but again, the numbers are not so high as to do serious damage. And anyway, paying out on claims is what insurers are supposed to do. It helps the guys in marketing shift new policies.
Frustrating though it is, today’s drop in the share price makes already-unfashionable L&G look ever cheaper as market trends clearly go in its favour.
Long-term savings are destined for long-term growth and more companies will offload their pensions liabilities onto firms like L&G.
The shares may not bounce anytime soon, but with a dividend yield of 8%, they do look tempting.