When looking for passive income opportunities, a stock’s yield is commonly used to compare different prospects. That’s what first brought Legal & General (LSE:LGEN) to my attention.

Today (11 March), the financial services group has published its 2025 results. As expected, its dividend for the year has been increased by 2% to 21.79p a share. With its 8.9% return, it remains one of the highest-yielding shares around. But does the stock have anything else going for it? Let’s take a closer look.

A look back in time

To fully understand today’s results announcement, we need to consider the events of three years ago.

When Legal & General published its numbers for the year ended 31 December 2022 (FY22), it reported earnings per share (EPS) of 36.49p and declared a dividend of 19.37p. Its book (accounting) value was £12.14bn.

Based on a share price at the time of 249.5p, the stock was trading on 6.8 times FY22 earnings and had a price-to-book (PTB) ratio of 1.2.

Fast forward to FY25 and the stock’s multiple is 25.1 and its PTB is 6.1. Looking at these figures, it appears as though the group’s shares have become much more expensive.

The devil’s in the detail

However, in January 2023, international accounting standards changed the way insurance contracts were treated. Instead of recognising earnings upfront, they were spread over the lifetime of each individual arrangement.

This change was purely presentational and backwards looking. However, at the stroke of a pen, the group’s book value at 31 December 2022, was reduced from £12.14bn to £5.53bn. And its EPS was restated at 12.47p, having previously been reported at 36.49p.

Remember, nothing had changed and yet the group’s accounting value was reduced by more than half and its EPS slashed by nearly two-thirds.

What does this all mean?

This makes comparing the group’s accounts across historical periods largely meaningless. However, to try and provide some clarity the group now reports its store of future profit. At 31 December 2025, this was £13.31bn, up from £13.17bn at the end of 2024.

However, this only covers around two-thirds of its business — its wealth management arm is excluded. Applying a sensible multiple to the earnings from this division, and adding it to the store of future profit, gives a figure greater than the group’s current market cap of £13.9bn.

On this basis, the stock’s undervalued. Along with its generous dividend (no guarantees, of course) I think it’s another reason why investors could consider adding the stock to their portfolios.

So far at least, the group appears to be successfully fighting off the challenge from low-cost market entrants. But competition is likely to intensify. And today’s results are a reminder of how big an investor the group is in stocks and bonds. A 0.01% adverse movement in the value of these would be more than its current market cap.

Although I’m positive, I’m not expecting huge share price growth. The stock’s modest increase in its estimate of future profit shows that it’s more of a steady plodder. Personally, I don’t see anything in the results to make me think the group’s going to cut its dividend any time soon. But then again, I can’t see its share price taking off. However, I’m not selling up.