I rate Legal & General (LSE: LGEN) as one of today’s top passive income stock candidates. And thanks to the recent stock market sell-off, it’s looking especially good value again.

The Legal & General share price hasn’t really moved much in the past 10 years, which is a bit of a disappointment. But the company has a good track record of paying decent dividends, and the shares had been starting to tick up this year.

I’m now wondering if potential investors might be in a similar position to a decade ago. Back then, financial stocks faced serious uncertainty — which was later compounded by the pandemic. And we increasingly see uncertainty growing again today. But there’s one major difference — we’re looking at considerably bigger dividends these days.

Cash cow

On 11 March, Legal & General announced a 21.79p dividend. And that marked a cracking 8.4% dividend yield on the previous day’s closing share price. The company also announced a new £1.2bn share buyback — its biggest ever. In total, the board plans to return as much as £2.4bn to shareholders over the next 12 months. Bagging some of that might be nice.

With the share price down a bit, we’re now looking at a huge forecast yield of 9% for the current year. And that’s easily the biggest in the FTSE 100 right now.

But what about the uncertain economic outlook? At results time, management was talking about returning more than £5bn to shareholders between 2025 and 2027. It doesn’t sound like it’s all that worried.

Forecasters expect the dividend to continue growing over the next few years too. So does all this make Legal & General sound like a cash cow that passive income investors should consider milking? It sure does to me.

There’s still room for caution though, even with the stock on a modest forward price-to-earnings (P/E) ratio of only eight. While forecasts show dividends rising, they also suggest earnings could dip a bit in the 2026-27 year. Still, with a company in the insurance business, that’s not necessarily so bad. And there does seem to be plenty of free cash to pay out to shareholders.

Wobbles ahead?

Saying that, I suspect markets could remain cautious over financial stocks like this for a fair while to come. And that means I think we could be in for a fair bit more share price volatility.

But I do see market downturns as great opportunities to consider buying depressed shares when they’re down. I definitely include Legal & General in that. And it might even be the best it’s looked in the past 10 years.

Just remember, over the past 20 years, the FTSE 100 has been providing average annual returns of 6.9%. That’s in-keeping with its longer-term performance too. And it’s the kind of thing long-term investors can use to build a sizeable passive income pot. It pays to reinvest our dividends. And buying on market dips can add a bit extra.