CORRECTION: The original version of this article incorrectly stated that Legal & General had suspended its dividend payments. The author apologises for this oversight, and the article has since been rectified.
I started investing in shares – mostly FTSE 100 stocks – in 1986/87, when starting at university. As the FTSE 100 was only created in January 1984, it was relatively new when I was a teenage investor.
The FTSE 100’s fourth colossal crash
My first market crash was October 1987, when the FTSE 100 plunged by 23% in two days. It bottomed out 36% down by mid-November and then took almost two years to regain its pre-crash peak.
Then came the late 90s dotcom boom, triggering the 2000/03 crash, when the FTSE 100 more than halved from its December 1999 high. The next big crash was the global financial crisis of 2007/09. The FTSE 100 roughly halved again.
Driven by Covid-19 and collapsing oil prices, crash #4 arrived this spring. The FTSE 100 plummeted 35% from its 2020 high of 7,675 to below 5,000. March 23 turned out to be the day when the FTSE 100 offered its biggest bargains.
In the FTSE 100, boring is rewarding
It’s inevitable that FTSE 100 crashes #5, #6 and maybe #7 will happen, probably in my lifetime (I’m 52). I cannot tell you when these will arrive, as no one can. Of course, share prices will be highly elevated just before these crashes, but that’s obvious.
Having witnessed four major (and many minor) market crashes in 34 years of investing, I’m far more prudent these days. I tend only to research and recommend FTSE 100 stocks. In my experience, exciting shares often become terrifying, while boring shares keep delivering the goods year after year!
A boring FTSE 100 share for income-seekers
Legal & General (LSE: LGEN) is one of the most boring FTSE 100 shares I could imagine. A household name in insurance and investment, L&G has been managing risk since 1836. It has become the UK’s largest provider of individual life assurance products, managing more than £1trn in assets for over 10m customers worldwide.
Despite surviving every global catastrophe since before Queen Victoria was enthroned, L&G’s shares were crushed by the coronavirus crash. In December 2019, L&G shares almost reached 325p. On 19 March, they closed at 138p, down 57.5%. For me, this was the bargain of a lifetime.
L&G’s 2020 dividend could exceed 8%
For investors seeking a decent yield on their cash, I think L&G offers attractive qualities.
At 227.4p, its shares trade 30% below their 2019/20 high. They are down 16% over the past 12 months. And they are 10% below their 8 June high. Thus, this FTSE 100 stock is far from expensive in historical terms and could go higher.
Covid-19 has had little effect on L&G’s rock-solid business. You’d think 65,000+ excess UK deaths would harm life insurers. However, most fatalities are among the over-65s, who are generally past working age or retired and don’t need life/health protection policies. Likewise, higher mortality among the elderly benefits L&G’s huge book of long-term annuities.
That said, a rise in credit downgrades and defaults due to Covid-19 and Brexit could hit L&G’s financials. But stress tests conducted by the regulator gave FTSE 100 insurers a clean bill of health.
L&G’s dividend has been steadily rising for years, as the following shows:
2015: 13.40p
2016: 14.35p
2017: 15.35p
2018: 16.42p
2019: 17.57p
Let’s say optimistic analysts are right and L&G pays a dividend of around 18.6p from earnings of 37.5p in 2020/21. That’s a current dividend yield of 8.2% a year, covered twice by earnings. This also puts L&G on a P/E ratio of 6.06, which is why I’d buy today.