Legal & General Group PLC (LSE:LGEN) sale of its Cala Homes arm should open the door to significantly higher cash payouts to shareholders, believe analysts at Berenberg.
Sold for an enterprise value of £1.35 billion, Berenberg believes L&G will add the £100 million solvency boost to any buyback with the 2004 results.
Berenberg estimates this will lift the 2025 buyback total from its initial £200 million estimate to £300 million.
Add in expected dividends 20.75p in 2025 plus the 5.1p buyback equivalent and this raises the payment to 26.3p or a total cash return yield of 11%.
Yesterday’s institutional retirement presentation also pointed to a need for less capital to fund future pension transfer (PRT) deals, leaving potentially more available for distribution to shareholders.
As a result, Berenberg has raised its buyback forecasts for 2026 and 2027 respectively to £200 million and £250 million.
Using its upgraded estimates, Berenberg now sees the sum of DPS and buybacks per share over the next three years at 78.7p or the equivalent of 33% of L&G’s current share price.
That is a “compelling cash return,” in its words with the potential for even more after 2028 as the PRT plan develops.
Buy with a target price of 265p is the view.
Shares today are up 0.8% at 238.2p.