Legal & General Share Price (LGEN)

Lending: "In that case surely this does not hold “what it does do is give LGEN more funds to grow the wealth and PRT businesses (in particular).” Both dividends and share buybacks/cancellations cost the company capital, reducing funds more IMHO."

Companies like to present share buybacks as a "return to shareholders". I prefer to wait to consider that! A share buyback may be beneficial if timed correctly, but may not!

My point about the dividends is that cost of the planned increase is largely covered by the planned buyback. It's an easy promise to make if you're Simoes! But LGEN's shareholder payouts are significant and therefore if Simoes' plan is to clip this wing, having more funds available to grow the growing parts of the business should be beneficial.

GS- a long term fan and holder here.

The Meiji Yasuda presentation from February gives a little more detail. Slide 9 shows dividends of £3.6bn and buybacks of £1.4bn+ (£1.8bn might be considered a best guess based on 40% of market cap) which is clearly better than the current £1.2bn dividend increasing at 5% p.a. even if the difference is largely made up of the £1.2bn proceeds from the deal. It also happens to be consistent with a declining dividend payout and buybacks increasing at 20% p.a.

What I can't see is capital reinvested in new business. Asset management and wealth business should be "capital-light" and only the PRT and annuity business that involves significant capital investment. Page 14 of the presentation gives a figure of £5-6bn for capital generation over the 3 years but even this might be "net" of the capital required to support new business.

“In order to return more capital to shareholders over 2024 to 2027 instead of the equivalent of maintaining the 5% per annum growth in dividends per share.”

If this is implemented then, surely, rather than increasing the dividend by 5% pa, they will be giving back more than that increase in a combination of dividends and cancelled share buybacks which, combined, increases the return of capital to the shareholders.

In that case surely this does not hold “what it does do is give LGEN more funds to grow the wealth and PRT businesses (in particular).” Both dividends and share buybacks/cancellations cost the company capital, reducing funds more IMHO.

Lionheart, you've highlighted what the market clocked when Simoes made the announcement about a year ago. The proposed 2% divi increase for 2025-27 is largely funded by the £500m buyback, so it is not actually using much of the net profit to pay shareholders. Perhaps that was why there was a lukewarm reception to the plan at the time (share price fell from c.240 to c.220p). But, what it does do is give LGEN more funds to grow the wealth and PRT businesses (in particular).

What I hope, as a LTH, is that accepting a reduced dividend increase for a few years puts the company in a better position long term to be more generous further down the road.

Guitarsolo

Https://www.lse.co.uk/news/legal-general-announces-163500m-buyback-as-annual-profits-rise-ukpqk6uaneze84y.html