I started buying Legal & General (LSE: LGEN) shares last July. So far, my position’s up 5.3%.
While that’s not bad, it’s not exceptional. Nonetheless, I plan to hold onto the stock for a very long time, hopefully decades.
But at their current price, I’m very keen to add more shares in the financial services stalwart to my portfolio in July if I have the investable cash. Let me explain why.
A bargain
To begin with, I think the stock looks good value at the moment. With a share price of 231.9p, down 6.8% year to date, the stock, as seen in the chart below, now trades on 11.9 times forward earnings.
Created with TradingView
That’s just above the FTSE 100 average, which is around 11. But for a business of Legal & General’s quality, I’m more than okay with paying a small premium.
Dividend yield
Being able to snap up shares that I can buy today and tuck away into my portfolio for the years ahead is the dream. What’s even better is when they have one of the highest dividend yields on the Footsie.
Created with TradingView
Legal & General’s yield stands at a whopping 8.1%. That’s more than double the Footsie average. The stock also pays more than its peer Aviva, which yields 7.7%.
Steady demand
Another reason I’m bullish about the business is because of the ageing population. With people living longer, demand for retirement, wealth, and protection products are on the rise.
Over the next 25 years in the UK, the number of people older than 85 will double to 2.6m. And I believe the firm is well-placed to benefit from this trend.
Legal & General already has a dominant position in this area. For example, it’s a leader in the pension risk transfer market. The ageing population isn’t just an issue in the UK either. It’s occurring across the globe. That’s an even larger market for the business to capitalise on.
The risks
That said, there are potential things that could harm its share price. The current economic climate is one.
We’re facing plenty of challenges at the moment, including inflation and high interest rates, which are a real detriment to the firm’s operations. This uncertainty often leads to people being less open to investing, as they’d rather have more cash to hand. As a result, Legal & General’s assets under management have fallen at times over the last couple of years.
Its operating profit also took a hit last year off the back of this. Until we’re out in the clear, which I don’t suspect will be for a while, Legal & General may continue to struggle.
Buying this month
But I see long-term value in the Footsie stalwart given its current price. Therefore, I won’t be selling my shares even if there are a few blips along the way, which I fully expect.
Instead, I’ll be buying more shares in July. That’s part of my plan to build out my position in the stock over the coming months while it still looks like good value.
This post was originally published on Motley Fool
