I’m always hunting for the best dividend shares to add to my passive income portfolio, but I can’t buy them all. It’s an ongoing balancing act trying to find the right mix of attractive yields and long-term reliability.
For me, the most reliable dividend payers tend to be companies with consistent industry demand, strong leadership, and a proven track record of payouts. Add to that a healthy balance sheet and manageable debt levels, and it often makes for a compelling investment case.
One company that has been on my radar for some time is Admiral Group (LSE: ADM). And after last week’s results, it’s looking more tempting than ever.
H1 2025 results
For those unfamiliar, Admiral is best known for its motor insurance business, although it also offers household and travel policies. Its bread and butter is car cover and it’s been doing it for three decades.
On 14 August, Admiral reported first-half turnover of £3.1bn, with profit before tax leaping 67% year on year thanks to competitive pricing and a strong performance in its UK motor insurance arm. Earnings more than doubled, up 106% year on year, while revenue climbed 22.6%.
Perhaps the headline figure for income investors was the dividend. Admiral hiked its payout to 115p from 71p. That sort of generosity is why the stock has such appeal among dividend shares.
The market clearly liked what it saw. By 20 August, the shares were up around 8.2% on the week, hitting a record high of 3,646p. They’re now up nearly 40% since the start of the year.
Dividends, valuation, and profitability
Admiral currently offers a dividend yield of 5.7%, backed by a payout ratio of 87.4%. While that’s on the high side, the company has managed over 20 years of uninterrupted dividends, which speaks volumes about its resilience.
From a valuation perspective, the shares trade at a price-to-earnings (P/E) ratio of 13.5 — not excessive given the recent growth. Profitability also looks solid, with an operating margin of 20% and a remarkable 65.3% return on equity (ROE). Its net margin has improved to 12% from 8.6% in 2024, showing better efficiency.
The only slight blemish is the balance sheet, with a debt-to-equity ratio of 1.1. While not alarming, that’s a little higher than I’d ideally like. If it rises further, debt obligations could threaten dividends.
Cautious optimism
Interestingly, Morgan Stanley upgraded Admiral to Equal-weight just before the results, having previously rated it Underweight. It did, however, warn of some risks in the UK car insurance market. Regulatory action from the Financial Conduct Authority on high-cost monthly payments could dent the company’s profits.
That said, both Goldman Sachs and Citigroup also raised their price targets for Admiral in the run-up to the results, reflecting broader market confidence.
My verdict
There’s no denying the recent rally has left the stock looking a touch expensive. The average 12-month price target from 16 analysts actually sits about 5% below today’s price.
Still, I’m taking a long-term view. With over two decades of dependable dividends, solid profitability, and a generous 5.7% yield, I think Admiral remains one of the most attractive dividend shares on the FTSE 100.
When the next payday comes, I’ll be buying.
