Why I Love Legal & General.
There are many reasons why i love L&G and they hold a strong position in my portfolio to represent that, to start with Legal & General is a well diversified company that believes in itself, management are buying up their own shares and the dividend they provide is incredibly resilient. This wonderful company continues to expand its assets into insurance, aging population and real estate all scalable areas of business for this company.
As a company L&G makes its money through insurance and pension schemes and is the biggest provider in these areas in the UK and has since expanded into the US market. They have over £1trillion in assets under management through its UK work pension scheme and is the UK's biggest life insurer as well as lifetime mortgage insurer.
L&G are not however concentrated on insurance, they are also building modular homes, electronic car recharging stations and retirement homes and living facilities through its city rejuvenation investments. L&G have plenty of room to expand in these areas and are setting themselves up to be well diversified for the future. From the image below we can see that despite L&G being seen as an insurance company only 11% of its income comes from insurance (LGI) and a large portion coming from their legal and general retirement institutional arm (LGRI), something that will be able to increase in scale as more and more people reach retirement age.
L&G also offer wealth management through the many funds they have setup to track groups of companies, but uniquely they offer funds that provide access to unique private assets owned by legal and general such as real estate. They are also in a position to rejuvenate the areas surrounding these private assets, increasing their value alongside improving the communities they work with. Using methods like this the different arms of legal and general benefit each other increasing their value and in my opinion this company simply has so much more room to grow its cash flow with incredible scalability not being tied down to one particular asset type.
Legal & General has consistently paid their dividend from 1998 and unlike many companies, they continued to pay their dividend through the financial crises in 2008, although it was cut, it fully recovered within 4 years. They have since adopted a progressive dividend policy and have continued to grow their dividend from 2008 to present day, as i am writing this they are continuing to pay their dividend through the covid crises and is one of the very few companies that have not taken any government funds to help it survive the crises showing impressive resilience against the pandemic.
Despite currently yielding around 8% the dividend payout to shareholders only stands at around 57% of their earnings allowing for the company to grow in the many directions that i had mentioned earlier.
Legal & General is one of my favorite companies, I hold them for their ability to continuously pay out dividends to their shareholders alongside their diversity in assets and scalability in profits. I fully believe Legal & General will be around for generations to come generating more cash flow as their business continues to expand and scale with not only aging population but with wealth management.