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If investors were asked to name 2025’s most popular UK stock, I’d wager many would say Rolls-Royce. Its shares have rocketed more than 1,000% in three years, after all.
Others might give a shout out to Lloyds Banking Group, a regular dividend growth favourite, or gold and silver miner Fresnillo after its 300% climb over the last year. None of those make the top spot. The most bought stock this year took me by complete surprise. It’s a company whose shares have risen just 4.35% over the last year and fallen 3.6% over five. The name of this FTSE 100 underachiever? Legal & General Group (LSE: LGEN).
Dividend hero
The insurer and asset manager nonetheless leads AJ Bell’s list of most purchased shares, beating Rolls-Royce into second place. Another huge growth winner, US tech giant Nvidia is third. I hold Legal & General in my Self-Invested Personal Pension (SIPP), but never imagined it was more ‘popular’ than those two. The obvious reason is that it pays a hefty dividend of 8.75%. On the FTSE 100, only advertising firm WPP yields more, but that’s just halved payouts after a dismal spell, so it’s hardly anyone’s favourite.
Yet that doesn’t fully explain its popularity. Legal & General isn’t even the favourite income stock in my SIPP. I’m a bigger fan of wealth manager M&G and insurer Phoenix Group Holdings. They boast bumper trailing yields of 7.36% and 7.94%, respectively, and their shares have climbed about 35% over the last year. Yet neither appears on the popularity charts.
FTSE 100 recovery potential
Perhaps it’s the name. Legal & General is better known than M&G, which only floated in 2019, or Phoenix. Another possibility is that investors are betting on a share price recovery after years of underperformance. I like buying high-yield dividend stocks with bounce-back potential. I added M&G, Phoenix and Lloyds to my SIPP in 2023. All three looked cheap with price-to-earnings ratios around six or seven, and all took off soon off afterwards.
I didn’t buy FTSE 100 insurer Aviva, but wish I had. It’s also had a strong run, up 35% over the last year with dividends on top. So what’s wrong with Legal & General?
Profits have been uneven, falling from £2.6bn in 2021 to £939m in 2022, then plunging to just £195m in 2023. Last year’s rebound to £542m is a start, but it’s still below peak levels. Earnings are forecast to climb again in 2025, by between 6% and 9%. But unless Legal & General smashes expectations, I don’t expect the shares to suddenly take off.
At least there’s the dividend. It looks secure for now and is expected to rise about 2% a year, with share buybacks on top.
The shares are worth considering today, but patience is essential as any share price recovery may take time. I’m still baffled by its massive popularity so maybe I’m missing something. It’s certainly not my favourite stock, although that could quickly change if the shares rally and give me growth on top of that super-sized income. Fingers crossed!
