Admiral Group (LSE: ADM) is a FTSE 100 share that’s not exactly toasted across the investment community right now.
Its healthy rating, a forward P/E multiple of 16.8 times, may sit above the index’s broad average, but the heavy price slump that followed last week’s trading release suggests many have fallen out of love with the car insurance giant.
Investors were turned off by news that “continued inflation in damage claims and increased large bodily injury frequency” at its Motor division caused its loss ratio to rise 20 basis points at group level to 66.4%. This forced Admiral to hike the cost of its policies, delivering a smack to sales growth in the second half of 2018.
Concerns regarding competition in the auto market have been doing the rounds now, and so Admiral’s decision to raise premiums higher more than its competitors has done little to soothe nerves.
That said, there’s still plenty to celebrate in those full-year results, in my opinion, and reason to expect earnings to keep rising (incidentally City analysts are predicting a 7% bottom-line improvement this year).
I’ve lauded Admiral’s long-term sales opportunities in foreign markets time and again. In fact, 2018 proved a significant step on its journey to conquer Europe as its International divisions delivered combined profits growth for the first time — last year the number of international car insurance customers on its books leapt by 18% to 1.22m.
The British insurer now has almost the double of overseas customers that it had just three years ago, and with it having established a Spanish insurance company last year to switch its European portfolio to, Admiral’s well placed to absorb any troubles emanating from Brexit and to keep growing sales across the European Union.
It’s no wonder then that the number crunchers are predicting that Admiral will have the confidence to raise the total dividend again this year, to 131.4p per share from 126p in 2018, a figure that yields a brilliant 6.1%.
Another large yielder
Whilst you’re here I’d like to bring your attention to National Express Group (LSE: NEX), another brilliant big-yielder that’s making a splash in foreign marketplaces.
The FTSE 250 bus and rail operator’s share price has leapt to record highs last month after releasing brilliant full-year financials which showed sales growth at each of its divisions accelerate during the second half of 2018, causing the firm to deliver decent sales and pre-tax profit growth last year (up 7% and 11%, respectively).
National Express made 10 acquisitions spanning North America and Spain last year, transactions that helped revenues hit record tops in both regions. And thanks to its strong balance sheet (free cash flow swelled 36% to a shade under £200m in 2018), it can carry on pursuing its successful M&A-led growth strategy, not to mention maintain its generous dividend policy.
This means that right now National Express carries a chunky 3.8% forward dividend yield, underpinned by expectations of a 5% earnings rise for 2019, too. Throw a low corresponding P/E multiple of 12.3 times into the mixer, too, and I think the business is another great stock to snap up today.