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Even as FTSE shares rally and leading indices reach record highs, there continue to be impressive high-yield opportunities for investors to capitalise on. And two stocks that are seemingly popular buys right now are Legal & General (LSE:LGEN) and Taylor Wimpey (LSE:TW.).
The insurance giant and homebuilder are apparently near the top of most investors’ shopping lists this month. At least, that’s what the latest data from AJ Bell’s showing. And with a dividend yield of 8.8% and 9.6% respectively, it’s not hard to see the appeal.
But are these actually good stocks to consider buying in 2025? Here’s what the experts are saying.
Time to buy Legal & General?
Institutional analysts seem to have a bit of a mixed opinion of this insurance titan. Starting with the positives, the group’s demonstrated strong operational execution with pre-tax profits up by double-digits this year. For the most part, it’s been driven by the continued outperformance of its retirement financial products and pension risk transfer business.
Management‘s also successfully shifting its asset management enterprise towards a high margin product mix to further support earnings expansion. And combining this with a bit of restructuring, Legal & General’s returning billions back to shareholders via both dividends and buybacks.
With this in mind, the group’s near-9% yield seems to be here to stay. Yet what analysts are concerned about is the state of British government bonds. Increased volatility among UK gilts is raising the risk surrounding liability-driven investment strategies that the company relies upon. And subsequently, the insurance giant is vulnerable to potential margin calls that could send profits moving firmly in the wrong direction.
This uncertainty can’t be ignored, in my opinion. So while the dividend yield looks secure right now, that could quickly change in the near future, especially as we approach the Autumn Budget in November. As such, despite their popularity, I’m not rushing to buy shares in this FTSE enterprise.
What about Taylor Wimpey?
Taylor Wimpey shares are offering an even more impressive payout at 9.6%. And that’s not entirely surprising given that the stock’s dropped by over 40% over the last 12 months. By comparison, Legal & General shares are actually up slightly over the same period.
This downturn’s a reflection of the uncertainty of the broader British housing market. High mortgage rates continue to contribute to an affordability crisis. Pairing this with continued costs surrounding cladding remediation, management’s already trimmed its full-year operating profit guidance. And even the group’s interim dividend took a hit, disappointing income investors.
But with the damage now done, is it time to capitalise on the high yield?
There is room for some optimism. Taylor Wimpey’s home completions are on the rise, and the business continues to enjoy a substantial landbank that underpins its future development potential. At the same time, the balance sheet seems to be well funded with a steady net cash position to help weather the softer market environment.
Nevertheless, with a big question mark hanging over UK homebuilders, the risks are currently too high for my tastes. That’s why I’m not tempted to invest in Taylor Wimpey either. Instead, my focus is on other more promising FTSE shares.
