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Authorized & Common (LSE: LGEN) shares have been fairly underwhelming. They’re up round 23% during the last 12 months, however over 5 years they’ve gained simply 2.5%. That’s skinny in contrast with FTSE 100 rival Aviva, which is up 85% over 5 years.
Authorized & Common’s dividend has been way more eye-catching, with a trailing yield of seven.3%. At occasions, it’s hit double digits. When yields get this excessive, buyers fear. Is it sustainable?
The board has elevated the dividend yearly because the pandemic at a mean fee of 4.22% a 12 months. Nevertheless, development slowed to only 2% in 2025, and the board has indicated that it’ll proceed to rise at that tempo.
Whereas that provides buyers helpful visibility, it’s truly beneath inflation, which hit 3.1% in August. So it’s shedding buying energy. In its defence, when the board introduced that 2% coverage, we had been all anticipating inflation to fall.
FTSE 100 earnings star
The forecast yield is now 7.54% for 2026, rising to 7.65% in 2027. Nonetheless a terrific earnings stream, if it comes by way of. Dividend cowl appears alarmingly skinny. Based mostly on 2025 core working earnings of 20.93p per share, the 21.79p dividend was lined lower than one occasions earnings.
Nevertheless, that isn’t how Authorized & Common desires buyers to evaluate the payout. Its Solvency II working surplus technology was £1.5bn in 2025, up 5%. The dividend value roughly £1.2bn, giving it a pleasant margin. Administration expects capital technology to develop sooner than the dividend. With luck, that ought to create extra headroom.
Sturdy steadiness sheet
Authorized & Common ended 2025 with a Solvency II protection ratio of 210%, comfortably above its medium-term working vary of 160% to 190%.
2026 outcomes up to now are encouraging. First-half core working revenue rose 7% to £918m whereas earnings per share jumped 11%. Solvency II capital technology elevated 3% to £790m. The protection ratio dipped barely to 201%, however the board mentioned it had improved dividend cowl by way of each earnings and capital technology.
There are dangers. Authorized & Common’s uncovered to monetary markets, rates of interest, property and credit score circumstances. Like most monetary shares, it might undergo in a inventory market crash. Its asset administration arm additionally wants to lift its sport after a troublesome interval.
Value-to-earnings ratio
Are the shares good worth? Weirdly, some platforms present a really low price-to-earnings ratio of 0.35. That’s distorted by the accounting remedy of this sophisticated monetary enterprise. The low ahead P/E round 7.7 appears tempting, though totally different knowledge suppliers produce totally different figures.
General, I feel the dividend appears pretty stable. The board clearly understands how vital earnings is to shareholders and is committing to continued development, albeit at a sluggish tempo.
I feel Authorized & Common’s value contemplating. After years of lagging rivals, the shares would possibly lastly ship some development, however I’ve been saying that for a very long time. I can see different tempting dividend shares on the market, probably with higher development prospects.
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Harvey Jones owns shares in Authorized & Common.
