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.
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.
