M&G Stock And Legal And General Shares For Inflation Protection In The UK

Stubborn inflation, a Bank of England rate hold at 3.75% and volatile Brent crude above $90 a barrel are putting inflation protection back on the radar for UK investors. Higher energy costs and the risk that UK inflation moves above 4% next year could reshape which stocks hold up best. This article looks at three UK listed companies with inflation related exposure that could be positively affected by these pressures. You will see where their inflation links might help and where the risks still sit, so you can judge whether these stocks fit your own approach to rising prices.

M&G (LSE:MNG)

Overview: M&G is a London based investment and savings group that runs asset management funds and life insurance products, including pensions and a wide range of annuities, for both institutional clients and individual savers in the UK and overseas.

Operations: M&G generates most of its £5.5b revenue from Asset Management at about £4.6b, with around £0.9b from its Life and Wealth activities, largely sourced from the UK at £4.7b.

Market Cap: £8.4b

Investors looking for inflation protection may find M&G interesting because a large part of its business is built around inflation linked bonds and annuities, at a time when UK rates are high and energy costs are feeding price pressures. The company sits on a wide savings and pensions franchise. Analysts have provided estimates that point to strong earnings growth, even though revenue is projected to decline and past earnings have been volatile with one off losses. M&G also carries funding risk given its reliance on external financing and its dividend is not fully covered by earnings, which may matter if you rely on income. Recent board and technology leadership changes add another layer for you to assess on execution quality and risk control.

M&G’s inflation linked bonds and annuities could be masking an underappreciated earnings story as price pressures build and funding risks linger. See how the 3 key rewards and 3 important warning signs (1 is major!) could tilt the balance for you next year

Legal & General Group (LSE:LGEN)

Overview: Legal & General Group is a large UK based insurance and asset management company that provides pensions, annuities, protection policies and investment products to both institutions and individual savers across the UK, US and other international markets.

Operations: Legal & General generates most of its roughly £12.5b revenue from Institutional Retirement at about £5.6b and Retail Retirement at about £1.7b, with Insurance at about £2.1b and Asset Management at about £1.1b, largely sourced from the UK at about £10.1b.

Market Cap: £16.2b

Legal & General Group sits at the crossroads of ageing population trends, growing pension assets and a world where UK inflation and rates remain a concern. Its large book of UK index linked gilts and real assets such as infrastructure can help shield parts of the business from higher prices. A forecast 12.39% annual earnings growth rate and high quality earnings point to potential support for a re rating if execution goes well. Set against that are funding and leverage risks, an uncovered 7.36% dividend and a relatively new management team and board that still need to prove themselves, especially as regulators, competitors and rating agencies scrutinise capital decisions and recent refinancing moves.

Legal & General’s earnings story looks stronger than many assume, with pensions, annuities and real assets tied into inflation. Get the full picture through the analyst forecasts for Legal & General Group before one key risk changes the script.

Supermarket Income REIT (LSE:SUPR)

Overview: Supermarket Income REIT invests in large grocery stores that support food distribution across the UK and Europe, owning omnichannel supermarkets that handle both online orders and in store shopping on long inflation linked leases to major operators.

Operations: Supermarket Income REIT generates about £108.5m from investment in supermarket property assets, with roughly £97.1m coming from the UK and £7.7m from France.

Market Cap: £1.2b

Supermarket Income REIT gives you direct exposure to supermarket properties where rents are often tied to inflation at a time when UK rates are high and energy costs are keeping price pressures in focus. The company has fixed almost all of its debt costs and management has highlighted confidence in supporting the dividend. However, earnings growth has been pressured and the payout is not fully covered by earnings or free cash flow. Recent equity raising and refinancing have added financial flexibility but also underline how reliant the business is on external funding. The key question is whether long dated, inflation linked leases to essential grocers can outweigh those funding and dividend risks as conditions evolve.

Supermarket Income REIT’s long inflation linked leases could be masking a more resilient income story. Find out how the 2 key rewards and 3 important warning signs (2 are major!) reveals the tipping point between dependable rent and funding pressure.

The three UK stocks above are just a starting point, and the full UK Inflation-Protected Securities screener has surfaced 3 more companies with equally compelling inflation related narratives through the UK Inflation-Protected Securities screener. Use Simply Wall St to identify and analyze the specific catalysts and narratives that matter to you so you can focus on the highest conviction ideas in this space.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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