Legal & General‘s (LSE:LGEN) share price has surged over the last 12 months, rising 14.3% to 269.1p today. With a 7.8% dividend yield thrown in, the FTSE 100 share’s delivered a delicious return above 22%.
One very upbeat forecaster believes Legal & General shares will rise 26% in value over the next 12 months, hitting as much as 340p, although many disagree.
I’m optimistic the company can keep providing market-beating dividends. With a robust balance sheet, I think the 8.1% yield for 2026 looks pretty secure. But why is this one analyst so bullish?
Could this FTSE blue-chip really rise again? Here are three reasons why it might.
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3 price boosters
Perhaps the most significant price driver could be a steady fall in global interest rates. This would have several large benefits for the company — boosting the amount of money people have to spend on financial products; lowering Legal & General’s borrowing costs; and raising the value of its stocks and bonds portfolios.
The share price could also rise if it displays strong execution of its strategic goals. This includes progress in the asset management sector, where it’s seeking to grow scale and margins, and the high-growth pension-risk transfer (PRT) market. It’s looking to write between £50bn and £65bn of PRT businesses by the end of 2028.
Finally, the company’s shares could receive a boost on signs of strong cash generation and a rising Solvency II capital ratio. The latter fell to 217% as of June from 232% a year earlier, latest financials showed. This still illustrates robust financial foundations, but an improving ratio will boost confidence in more market-busting dividends and share buybacks.
Looking expensive
Having said all this, it’s important to think about the valuation Legal & General shares currently command. Its price-to-book (P/B) ratio has shot up to 6.4 times, miles above the long-term average of 2-3. This shows the business trading at a hefty premium to its balance sheet assets.
At these levels, investor interest might cool sharply, limiting scope for further share price gains. This is why most analysts aren’t as confident as the one predicting a 26% price rise over the next year. In fact, the average 12-month price target is 267.3p per share, representing a slight decline from today’s levels.
Are Legal & General shares worth considering?
So is the FTSE 100 company a potential buy? Maybe. As a shareholder myself, I’m not expecting the share price to take off again over the next year. But I still think it’s a top stock to consider buying, especially for those seeking passive income. Annual dividends are expected to have risen in 14 of the last 15 years when results for 2025 are released on 11 March.
And over the long term, I’m expecting Legal & General shares to rise as an ageing global population drives financial services demand. But I’ve found another FTSE stock that could perform even better.
