Legal & General (LSE: LGEN) has bumped up its dividend again. Is it now the best income stock on the FTSE 100?

Well, for one, It pays out the seventh biggest yield on the Footsie. Also, at its current level, it’s one of the few stocks to pay out a rate higher than inflation. Forecasts say the dividend should keep increasing over the next few years as well.

I’d like to take advantage and target a £2,000 yearly passive income. Here’s how I’d go about it.

The Legal & General share price is now 218p and its full-year dividend is 18.64p. As a yield, that means I’m getting back 8.97% over the year from any investment I make. 

For me to receive £2,000 each year then, I’d need a £22,297 investment into the stock. In terms of the shares, I’d need to buy 10,228 to get that much. 

That sounds nice in theory, but a dividend is about more than one year. I want to know if Legal & General will be a reliable payer in years to come.

If it will, then I’d see my £2,000 passive income rise as dividends go up. I could also reinvest them to make the income stream go even higher. With that high payout, it might even be the best FTSE 100 dividend stock. So, let’s look at the evidence.

A reliable dividend?

First, the firm isn’t having to spend too much of its money on its dividends. Last year’s payment was covered 1.9 times by earnings. That’s a big margin of safety. One that a few other of the higher FTSE 100 dividend stocks don’t have. 

Second, the firm has increased payouts year after year. In fact, in this century, the dividend went up every year except for the two that followed the 2008 crisis. A track record like that is one of the best pieces of evidence for it to continue in the future. 

Last, analysts forecast the dividend to continue rising for the next five years. These aren’t perfect predictions, but they’re right more often than they are wrong. I’m happy to note that they don’t see any obvious problems in the near future.

Best on the FTSE 100?

A word on the risks. The biggest one for me is the sector, as finance comes with its own unique issues. The 2008 crisis was an obvious example from the past. If something like that happens again, the dividend would be under threat. 

So yes, I do believe this will be a reliable dividend. I’d even say it’s one of the best on the FTSE 100. I own the shares already, but I’ll look to buy more and aim for my £2,000 passive income target.

The post I’d buy 10,228 shares of Legal & General stock for £2,000 in yearly passive income appeared first on The Motley Fool UK.

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John Fieldsend has positions in Legal & General Group Plc. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.