While Legal & General (LSE: LGEN) is a well-regarded FTSE 100 financial services provider, its stock market performance in recent years has been disappointing. Over the past five years, Legal & General shares have basically drifted sidewards, losing 1% of their value.

Given that the FTSE 100 index overall has moved up by 51% over the same timeframe, that is a woeful performance.

Still, it could mean that the shares are now more attractively priced than many rivals.

High dividend yield – and a dividend growth policy

Not only that, but share price movements are only one component of how a shareholder can earn a return.

Another is dividends – and on this front, Legal & General shares have been much better performers than the FTSE 100.

At the moment, the flagship index yields 2.9%. Legal & General’s yield of 8.2% looks simply massive compared to that. In fact, the company is currently the highest-yielding among all FTSE 100 shares.

Things might get even better!

Why? Because Legal & General has a policy of aiming to grow its dividend per share each year.

Last year’s dividend was 21.4p per share and the current targeted growth rate is 2% annually. If the company delivers on that, in the coming year each share should earn around £2.39 in dividends (not far off the current share price of £2.61).

That would mean 100 shares bought today, for around £261, could generate £239 of dividends over the next decade.

Can the dividend keep growing?

Will it deliver on that!?

After all, dividends are never guaranteed – and an unusually high dividend yield can sometimes be a red flag that the City is pencilling in the risk of a dividend cut.

Legal & General has not cut its dividend for a while but it did do so during the 2008 financial crisis. It also reduced its rate of targeted annual dividend growth over the past several years, raising some eyebrows among income-focussed investors.

There are several challenges as I see it.

The planned sale of a large US business will raise cash in the short term, but lead to lower recurring revenues. That could hit profits.

On top of that, the company’s earnings in the past couple of years were well below previous levels. That helps explain why Legal & General shares have gone nowhere fast.

That is not necessarily a risk to the dividend, as cash flows are what really matters when it comes to paying dividends. I do have a concern that the company’s performance suggested weak momentum. The interim results last year, however, showed capital generation inching up, which partly reassured me.

One to consider

I think the business has a number of strengths that bode well for future capital generation too.

The market for retirement-linked financial products is large and likely to stay that way. Legal & General has a focused strategy, large customer base, proven business model and well-known brand.

Although Legal & General shares have performed weakly in recent years relative to the wider market, I think they are attractively priced given the long-term income potential.

I see this is a share investors should consider.