FTSE 100 insurer Admiral (LSE: ADM) has built its market reputation on operational consistency and high cash returns.
Its latest results showed record profits and sharply higher dividends, reinforcing its status as one of the index’s most generous income payers.
But what are the dividend yield forecasts now, and how much income can it make me?
Rising forecasts from a high base
Admiral paid a total dividend in 2024 of 192p, equating to a 6.2% yield at the current £30.89 share price.
That is double the FTSE 100 average, and above the ‘risk-free rate’ (10-year Gilt) of 4.5%. I see the additional yield as compensation for taking the extra risk in investing in shares over zero risk.
The payout momentum has accelerated this year. The interim dividend was lifted 67% from 51.3p to 85.9p and the special dividend raised 48% from 19.7p to 29.1p.
Consensus forecasts now point to a 7.1% yield this year and next, rising to 7.5% by 2027.
This keeps Admiral firmly among the FTSE’s most generous income stocks.
Do recent results look supportive?
Earnings growth is the powerhouse of any firm’s dividends over time. A risk to Admiral’s is the crowding in the UK motor insurance market, with price comparison sites squeezing margins.
However, its 2024 results released on 6 March 2025 showed a record year. This was despite average UK car insurance prices falling over the previous 12 months.
Profit before tax surged 90% year on year to £839m and earnings per share (EPS) almost doubled to 216.6p. Turnover climbed 28% to £6.15bn, driven by a 37% rise in insurance revenue, while the customer base expanded 14% to 11.1m.
The strong momentum carried into H1, with profit before tax rising 69% to £521m and EPS up 72% to 132.5p. UK Motor profits climbed 56%, while Household and Admiral Money more than doubled their contributions. Customers grew another 10% to 11.4m.
This again occurred despite lower average UK car insurance prices, underscoring Admiral’s resilience to any softening in the insurance sector.
How much passive income can I make?
My £10,000 holding in the firm would make me £11,121 in dividends at the 7.5% projected rate. This also includes me reinvesting the dividends along the way, known as ‘dividend compounding’.
Of course, yields can shift markedly over time, both up and down. A stock’s yield moves inversely to its share price if the annual dividend is unchanged, and dividend amounts themselves can vary.
That said, over 30 years on the same twin bases, the dividends would increase to £84,215. Including my £10,000 initial holding, the total value of my shares would be £94,215 by then.
And this would pay me £7,066 at that point!
My investment view
I bought Admiral shares primarily for their very high dividend yield, and I expect this to continue. Separately, I also see the potential for capital gains if I ever choose to sell. The shares look extremely underpriced relative to their ‘fair value’, and over time stocks tend to converge towards that level.
Specifically, a discounted cash flow analysis suggests Admiral is 49% undervalued at its current £30.89 price, implying a fair value of £60.57.
Given this and its exceptional dividend yield, I plan to add to my holding soon.
