As dividend stocks go, life insurance companies have a mixed track record. On the one hand, they operate in a sector which is relatively immune to the economic cycle (people don’t typically cancel their life insurance just because there’s a recession). On the other hand, dividend cuts are fairly common within the sector, despite its blue chip credentials. However, if you can spot the safest insurers and buy them at reasonable prices, I think the potential yield plus growth rewards can be worth the risk.
With that in mind, this month I’m going to pit two of the UK’s biggest life insurers against each other to see who comes out on top.
Two high quality, high growth insurers
So why pick Legal & General (LON:LGEN) and Prudential (LON:PRU)? The main reason, other than that they’re high profile large cap blue chips, is that they both have impressive histories of steady dividend growth. Okay, neither of them is perfect; Prudential cut its dividend after the market crash of 2003 and L&G cut its dividend after the market crash of 2008. But both companies rebounded quickly and, other than those two blips, their recent performance has been impressive, as the accompanying charts show….