As the market heads for a new eight month high, Legal and General is leading the way after better than expected results and a big payout to shareholders.
The insurer said operating profits had climbed from £1bn to £1.06bn, ahead of analysts' forecasts of £1.04bn, and said it would pay a total dividend of 6.4p a share, up by 35%. This puts the payout above the 5.97p it paid in 2007 before it made an unpopular cut.
Legal's shares are up 6.1p at 131.4p, and Eamonn Flanagan at Shore Capital said:
Legals reported a powerful set of 2011 results with the 35% growth in the full year dividend, to 6.4p, the highlight… this finally lays to rest the ghost of the 2008 dividend cut.
Operationally, the highlights were the two huge annuity schemes written - a £1.1bn bulk annuity with T&N and the £1bn longevity deal with Pilkingtons. With this increased risk appetite Legals' new business prospects appear strong in our view. Legals sees little prospect of a rebound in real economic growth in 2012 but remains confident of its own prospects in the risk, annuity and savings market. We tend to agree. Buy.
Panmure Gordon also issued a buy recommendation, with a 139p price target, but Investec advised clients to sell the shares:
We view [the dividend rise] as a very confident statement by the company, but continue to see significant strategic challenges ahead. We expect to retain our sum of the parts-based target price [of 104p] and, given recent share price strength, move our recommendation to sell [from hold].
Legal has helped the FTSE 100 climb 27.80 points to 5983.71, lifted by growing optimism about the eurozone and upbeat comments on the US economy from the Federal Reserve. It the leading index closes near this level it will be its highest since early July 2011.
Banks are wanted as the bulk of US financial institutions passed the latest stress tests, and the eurozone situation calms down. Barclays is 8.25p better at 247.8p and Royal Bank of Scotland has risen 0.35p to 26.11p.
But Smiths Group has fallen 37p to £10.64 after the technology group's results disappointed investors.
