The Legal & General (LSE:LGEN) share price is down 10% over the past year, but rose today on some positive news.
The British multinational financial services and asset management company saw its share price tumble following Russia’s invasion of Ukraine. But recent performance has been positive, and this was reiterated in a trading update today.
I’ve already bought Legal & General stock, but maybe I’ve missed the chance to buy more at a lower price.
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Strong performance in a difficult market
On Thursday, Legal & General said the first half of 2022 had been positive. It noted that its operating performance has been in line with expectations, adding that it expects to deliver double-digit growth in cash and capital generation for the first half.
“This reflects the strong execution of our stated strategy – which is closely aligned to long-term structural growth drivers such as ageing demographics, investing in the real economy, and addressing climate change – both in the UK and, more recently, in the US,” Chief executive Sir Nigel Wilson said in a statement.
He claimed that Legal & General’s exposure to inflation was minimal and the balance sheet was strong. “The recent increase in solvency provides further security and optionality,” he added.
An impressive 2021
The FTSE 100 giant performed well in 2021. The firm raised its dividend earlier this year after announcing a 39% rise in annual pre-tax profits. Profits before tax for 2021 came in at £2.49bn. Profit after tax rose 28% to £2.05bn.
The company’s increased profits were underpinned by a resurgent housing market. House prices and demand for new homes soared during the period. Legal & General is major UK housebuilder, which may surprise some investors.
Prospects
It’s also a massive player in the asset management business. The brand is incredibly well known and this should help it attract customers and reduce net outflows in the long run.
But, in the short term, there may be some challenges. Any firm in the investment space will likely perform poorly in a climate characterised by soaring inflation and a cost-of-living crisis.
It also operates amid intense competition in the asset management industry. The group’s exposure to the cyclical housing market through its capital investment business may pull it down in the near term too. Negative economic forecasts and higher interest rates will likely weigh on the housing industry in H2.
The firm may also need to evolve as fintechs and other start ups enter the sector, but I see Legal & General performing well over the long run.
Buying more!
I’d buy more stock at the current share price. Performance has been positive in recent months despite the tough conditions.
But in the long run, I think the company’s focus on mature investors and pensions will continue to deliver. Customers will also be more willing to invest their money when we are through the current and rather gloomy period.
It’s worth noting that the dividend yield is very attractive too. It currently sits at a whopping 7.5%. Last year, dividend coverage was 1.85.
