Legal & General makes five year pledge to pay shareholders dividend increases of up to around 5%

Legal & General, traditionally one of the UK’s bigger dividend payers,  today declared it would make a flat payout this year but increase it for the following five years by a percentage of “low to mid-single digits”.

Setting out a five year plan for investors today, the retirement giant said its ambition was for profits to grow faster than its dividend payments, with cash and capital generation “significantly exceeding” divi payouts.

“We intend, in aggregate, to generate £8.0-9.0 billion both of cash and capital, and to dividend £5.6-5.9 billion, " the company told investors.

Dividends have been a vexed topic for savers with shares in their portfolios because many of the biggest payers either suspended them or cut them dramatically during the Covid-19 crisis.

L&G continued paying a dividend despite many other insurance companies putting theirs on ice.

The Bank of England had warned insurers to “pay close attention” to the need to support policyholders and the “real economy” when considering dividend payments.

Despite that, L&G paid a 4.93p interim dividend, equal to last year’s payout. It said it could afford the payment and pointed out that dividend income was important to shareholders.

In today’s strategy update, L&G chief executive Nigel Wilson said:"Legal & General has a clear and well established strategy, and five strong businesses with distinct competitive advantages. 

"The markets we operate in are large and growing and we are well placed to capitalise. 

"We have announced today a clear set of five year financial ambitions, delivering an attractive combination of income and growth."