A Stocks and Shares ISA is one of the most effective ways for UK investors to grow wealth over time. The key reason is that it is exempt from income and capital gains tax. It also allows for withdrawals at any age, unlike private pensions.
FTSE 100 insurance giant Admiral (LSE: ADM) stands out strongly as an ISA candidate for me. It is supported by consistently high cash generation, market‑leading underwriting discipline and a long record of dependable shareholder returns.
So, what sort of dividend income could investors be looking at?
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What are the dividend income projections?
Analysts forecast Admiral’s will rise from the current 4.6% to 5.1% this year, 6.1% next year, and 6.6% in 2028. These payouts can go up and down over time, of course, as share prices and annual payouts alter.
But using the forecast 6.6% as an average, £20,000 in the stock (the same as my holding) would make £18,626 in dividends after 10 years. The figure also assumes that the payouts are reinvested into the stock — known as ‘dividend compounding’.
On the same basis, the dividends would increase to £124,071 after 30 years — the end of the typical long-term investment cycle.
By then, the holding’s value (including the initial £20,000) would be £124,071. And that would be paying an annual income of £8,189!
What about share price gains too?
The best way I found as an investment bank trader to identify the price at which any stock ‘should’ trade is discounted cash flow (DCF) analysis. It is especially useful to know as, over time, share prices tend to converge to their ‘fair value’.
DCF anchors a stock’s value by projecting future cash flows for the underlying business and discounting them to the present. When those forecasts are less clear, the discount applied increases. And varying assumptions here can cause analysts’ DCF valuations to differ.
Based on my own framework — including a 7.4% discount rate — Admiral looks 47% undervalued at its present £34.64 price.
That suggests a fair value of £65.36 — nearly double the current level. So this could be a potentially great buying opportunity if those DCF assumptions prove correct.
How does the firm’s growth momentum look?
Rises in a company’s dividends and share prices are driven by consistent increases in profits. A risk here for Admiral is a sharp downturn in the UK motor market. Another is increased competition in the sector that could squeeze its margins.
Nevertheless, analysts estimate that its profits will grow by an annual average of 5% over the medium term.
This looks an underestimate to me, given its 2025 results released on 5 March 2026. Profit before tax rose 16% year on year to £957.9m, while customer numbers grew 10% to 11.4m.
My investment view
The combination of tax‑free compounding inside a Stocks and Shares ISA and Admiral’s long record of dependable profit growth creates a powerful long‑term wealth engine.
For these reasons, I already have a holding in the firm but will be adding to it soon. And they are also why I think the stock is worthy of other investors’ consideration.
Additionally, I have my eye on other high-dividend-yielding shares in other sectors that also look very undervalued.
Should you invest £5,000 in Admiral Group Plc right now?
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Simon Watkins owns shares in Admiral.
