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I’m consistently in search of top-notch shares so as to add to my passive revenue portfolio. And looking throughout the complete FTSE 100, Authorized & Normal Group (LSE:LGEN) at the moment stands out among the many crowd. Why? As a result of it at the moment has the very best yield within the index at 8.9%!
Different revenue buyers have additionally seemingly taken discover, with Authorized & Normal shares being among the many high 10 buys within the final month, in accordance with AJ Bell. And it’s not tough to see why.
With simply 4,655 shares, buyers can earn £1,000 every year in dividends on the present degree of payout. Wanting on the share worth at the moment, such an funding would price round £11,350. By comparability, passive index buyers would wish to spend nearer to £32,260 to generate the identical revenue stream.
So ought to I be dashing to purchase this high-yield FTSE inventory? Or is that this an funding lure?
Extra dividends on the horizon
At first look, there’s quite a bit to love about Authorized & Normal’s dividend. Aside from the excessive yield, the insurance coverage large has efficiently raised shareholder payouts 14 out of the final 15 years by a mean of 11.8% yearly. And that pattern has seemingly continued in 2025 with the interim dividend receiving yet one more enhance.
Wanting forward, extra dividend development might be on the horizon. Administration outlined its ambitions earlier this 12 months to return £5bn again to shareholders by dividends and share repurchases.
Evidently, that feels like a no brainer. So why aren’t extra buyers capitalising on the excessive yield?
Nothing’s assured
As of the agency’s newest outcomes, Authorized & Normal’s producing sufficient money move to cowl its dividend obligations. Nonetheless, this payout protection is getting fairly tight. Throughout the primary six months of 2025, working income landed at £905m. However dividends paid through the interval reached £898m.
In different phrases, Authorized & Normal’s producing sufficient money move to afford its yield. However there’s nearly no margin of error. And proper now, having some wiggle room might be important.
As an asset supervisor and insurance coverage enterprise, Authorized & Normal’s extremely delicate to volatility inside the inventory and bond markets. Each are at the moment going through macroeconomic challenges and uncertainty that would adversely influence the group’s funding efficiency in addition to scale back new enterprise volumes.
That is significantly prevalent within the pension threat switch market at the moment. Rate of interest cuts are steadily decreasing the alternatives and demand for annuities, which have been a terrific supply of income lately.
But when these diminishing money flows can’t be offset with different monetary merchandise, Authorized & Normal’s earnings might wrestle to maintain up with its increasing dividend burden. And on this situation, a payout minimize would seemingly be inevitable.
The underside line
Authorized & Normal’s excessive yield is undoubtedly engaging. Nevertheless it’s additionally a mirrored image of the danger related to this enterprise, as is the group’s comparatively flat share worth efficiency over the past 5 years.
Personally, the danger’s too excessive for my portfolio. Much more so, contemplating there are way more thrilling and sustainable dividend alternatives accessible to discover proper now.
