As we approach another year’s ISA deadline, I’ve been watching the Admiral (LSE: ADM) share price with one eye on the dividend yield. Full-year results delivered Thursday (6 March) didn’t disappoint, with the shares up 5.5% in early trading.
Dividend boost
For the 2024 year, Admiral announced a final ordinary dividend of 91.4p per share, taking the full-year ordinary payment to 162.4p including the interim 71p. That’s a 5.5% yield on the previous day’s closing price.
And it gets better, with a 29.6p special dividend taking the total to 192p for a total 6.6% yield.
I’m a bit surprised the company doesn’t follow recent trends and return extra capital through share buybacks. Earnings per share (EPS) climbing 95% to 216.6p gives us a trailing price-to-earnings (P/E) ratio of 13.4, so it doesn’t look like the stock is too highly valued.
Cracking results
I really don’t see much for shareholders to complain about in this set of results as profit before tax climbed 90% to £839.2m, based on a 28% rise in turnover to £6.15bn.
CEO Milena Mondini de Focatiis was understandably enthused: “2024 was a remarkable year … as we welcomed an additional 1.4m customers to the group.”
She added: “The main driver of our exceptional performance was our UK Motor business. However, it is great to see UK Household, Admiral Money, and our French and US Motor businesses all report a double-digit profit.“
But she also warned: “As we enter into 2025, the market is softening, and the outlook is uncertain.“
Competitive market
Uncertainty is very much at the forefront for the insurance business, especially retail insurance of the Admiral kind. It’s a hugely competitive market. And I really think we should be careful over one year’s results, excellent though they might be.
Admiral’s liquidity position looks strong, with a solvency ratio of 203%, even after the dividend. That’s up from an already high 200% a year previously.
Gross loan balances at Admiral Money rose 23% to £1.17bn over the year too. And to me, that adds to the insurance gains in suggesting high customer confidence in the company.
Missed chance?
The share price rise so far on the day is, I think, still fairly modest considering this profit spike. I suspect it reflects the uncertainty of the industry, and the freqent year-by-year lumpiness of profits. With forecast rises in earnings dropping the forward P/E over the next two years, I just can’t see Admiral as overpriced.
I currently own Aviva shares, and I have Legal & General on my list of candidate buys. But those are heavily into savings, investments and commercial insurance. And I like the idea of going for a retail-focused insurer like Admiral.
But dividends aren’t guaranteed. And a big one-off special can sow the seeds for future disappointment if it’s not repeated. It’s in a cyclical sector, and I can see volatility in the share price in the short and medium term. And dividend volatility too. But I definitely think it’s one to consider.
This post was originally published on Motley Fool
