The Motley Fool

Here’s why the Admiral share price is climbing again

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Sale agent deal to car loan contract with customer.
Image source: Getty Images

Having already put in a stellar performance over the last year, the Admiral (LON: ADM) share price was climbing again this morning. A quick look at today’s interim numbers shows why investors are happy to continue handing their capital over.

Profits jump!

Perhaps supported by the huge demand for second-hand cars recently, Admiral added a healthy 640,000 new UK customers over the period. This was a 12% increase compared to the same period in 2020. A 14% rise in international policyholders to 1.71 million was also seen. 

5 Stocks For Trying To Build Wealth After 50

Markets around the world are reeling from the coronavirus pandemic… and with so many great companies trading at what look to be ‘discount-bin’ prices, now could be the time for savvy investors to snap up some potential bargains.

But whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be a daunting prospect during such unprecedented times.

Fortunately, The Motley Fool UK analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global upheaval…

We’re sharing the names in a special FREE investing report that you can download today. And if you’re 50 or over, we believe these stocks could be a great fit for any well-diversified portfolio.

Click here to claim your free copy now!

With numbers like these, it’s no surprise Admiral’s bottom line looked very healthy. Group pre-tax profit came in at a little over £482m — a jump of 76% on that achieved last year! Pandemic aside, that’s quite a result.

Commenting on today’s results, CEO Milena Mondini de Focatiis said Admiral had “done the right things more often and a bit earlier than most.” This included offering more digital options to policyholders. The fact that the UK was still in lockdown in early 2021 no doubt helped as well. Fewer people on the roads meant fewer claims for the FTSE 100 constituent.

The good news doesn’t stop there. 

Another special dividend

This morning, Admiral conferred a 115p per share dividend to its owners. Broken down, this was made up of an 87.9p normal payout. The remaining 27.1p was a special dividend. This represents a stunning 63% increase on that awarded this time last year. 

And there’s more. On top of this, Admiral also announced another special dividend of 46p per share following the sale of its Penguin Portals comparison business. Importantly, this is only the first payment of a phased return of cash to those holding ADM’s stock.

This brings the total to a stonking 161p. Even if we ignore whatever Admiral decides to return to owners at the end of the financial year, that’s already a yield of 4.6% based on today’s share price! 

But there’s certainly more to Admiral than just the dividend stream. This is a FTSE 100 company that consistently delivers excellent margins. While certainly not high, returns on capital are also better than at competitors. With this in mind, it’s not really a surprise the Admiral share price has done so well over the last 12 months (+38%).

Now, if I were hunting for income from my investments, Admiral would certainly make my list of worthy candidates. This isn’t to say there aren’t a few things to be aware of.

Has the Admiral share price peaked?

Naturally,  we should expect the company to see claims increase as more of us get back into our cars. This being the case, the Admiral share price might not motor at quite the same pace as it has over the last year. 

It’s also worth keeping in mind that today’s interim payout already amounted to 87% to first-half earnings. As such, growth to the normal dividend might not be so strong going forward.

Finally, it’s worth reflecting on the valuation. At 15 times earnings, the shares aren’t as cheap as those of other FTSE 100 and FTSE 250 insurers. Aviva, for example, changes hands at a P/E of less than 8. In the second tier, Direct Line can be snapped up for 13 times earnings. 

So, while I do like the stock, I’d also run the rule over those companies before buying.

There’s a ‘double agent’ hiding in the FTSE… we recommend you buy it!

Don’t miss our special stock presentation.

It contains details of a UK-listed company our Motley Fool UK analysts are extremely enthusiastic about.

They think it’s offering an incredible opportunity to grow your wealth over the long term – at its current price – regardless of what happens in the wider market.

That’s why they’re referring to it as the FTSE’s ‘double agent’.

Because they believe it’s working both with the market… And against it.

To find out why we think you should add it to your portfolio today…

Click here to get access to our presentation, and learn how to get the name of this 'double agent'!

Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has recommended Admiral Group. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Our 6 'Best Buys Now' Shares

Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply click below to discover how you can take advantage of this.