Due to current economic volatility, I believe there could be some opportunities to boost my holdings on the stock market. Legal & General (LSE:LGEN) could be one of them. Let’s take a closer look at what’s been happening to the Legal & General share price as well as other fundamentals to help me decide if I should buy the shares.
Legal & General share price nears pre-dip levels
Legal & General is one of the UK’s largest financial services businesses. With roots stretching back to the 1830s, it currently focuses on four main areas. These are retirement planning, investment management, capital investment, and insurance.
So what’s the current state of play with the Legal & General share price? Well, as I write, the shares are trading for 283p. At this time last year, the stock was trading for 259p, which equates to a 9% return over a 12-month period. The shares have bounced back from the March stock market dip caused by geopolitical issues. They have returned 24% from 227p on 7 March up to current levels.
Risks to note
Tightening regulation is a tangible risk that could affect performance and returns, as well as investor sentiment for Legal & General. Financial services businesses are extremely tightly regulated here in the UK. Changing regulation could affect profitability which could affect returns.
Next, competition in Legal & General’s market is intense. There are many large players all vying for market dominance and the same customers. Some that spring to mind are RSA Insurance Group and Aviva. Competition is natural and healthy, but I need to keep an eye on this to ensure Legal & General is performing consistently to provide me with sustainable and long-term returns.
The bull case and my verdict
So to the bull case then. Before I dive into the fundamentals, I must admit Legal & General’s profile, presence, and diversified business model is definitely a plus point for me as a potential investor. It is the UK’s number-one life insurance provider. This market should only grow due to the current ageing demographic in the UK.
Furthermore, Legal & General has extensive assets under management in its investment arm, over £1.4trn in fact. It also has an extensive pension business that helps consumers, businesses, and their employees plan for that next phase in life. All these factors should help boost performance growth and sustainable returns for a long time to come.
So some fundamentals then. Despite the Legal & General share price rallying in recent months, it still looks great value for money on a price-to-earnings ratio of just eight.
One of the primary lures for me as a potential investor is Legal & General’s passive income opportunity through dividend payments. The shares’ current dividend yield stands at an enticing 6.6%. This is higher than the FTSE 100 average of 3%-4%. I am aware that dividends are never guaranteed, however.
Finally, I can see that Legal & General’s most recent annual report saw revenue exceed pre-pandemic levels. This is key for me as performance underpin returns, after all. I do understand that past performance is not a guarantee of the future, however.
Overall I believe Legal & General shares could be too good for me to miss out on right now. I would add the shares to my holdings and expect to receive consistent and stable returns for the long term.