At just £12,548 a year before tax, the UK State Pension is far below the average UK salary. Despite this, many Britons rely solely on it for retirement.

Fortunately, even those on minimal income can improve their situation before it’s too late. For investors without another plan, compounding savings in an ISA can be a life-saver – particularly when taking into account the tax benefits.

Let’s break it down.

Start small, limit risk

The number one reason most people don’t open an ISA is because they don’t feel they have enough to invest. The second reason is fear — they don’t understand how to manage the risks.

In almost every case, these beliefs are unwarranted. Even just £100 a month can make a huge difference in 10-20 years. And the risks — while real — aren’t as overblown as sensationalist news would have you believe.

For instance, shares in the FTSE insurance giant Admiral Group (LSE: ADM) tanked 50% in 2022. That metric alone would be shocking, but zoom out and the price has actually been steadily climbing for over 20 years. Any sharp dips have always been replaced by growth within a few years.

More importantly, it’s been paying a solid, unbroken stream of dividends for 22 years. That matters when planning for retirement — let me explain why.

A dividend reinvestment plan

When building a retirement portfolio, many investors use a dividend reinvestment plan (DRIP). This simply means putting all dividends back into the pot, thereby slowly building up a larger position, and compounding the growth exponentially.

How does that look in practice? 

Admiral’s yield typically hovers between 5% and 6% and its annualised 20-year growth is 9.2%. So by reinvesting dividends, it boosts the total return to around 14%-15% a year.

With those averages, just £100 a month could grow to £151,695 in 20 years. Using the recommended retirement withdrawal rate of 4%, that could net the ISA holder an extra £6,000 a year.

Meanwhile, the reinvested dividends alone would be feeding over £7,500 back into the pot.

So is Admiral the best stock to consider?

Diversification is key

No stock is the ‘best’ stock, which is why you can’t just focus on one. Admiral is a great example — its annual revenue has climbed from £1.23bn in 2019 to £5.57bn today, and its assets consistently outweigh liabilities.

And barring a few reductions, its dividend growth shows steady increases averaging 5%-6% per year. That’s what you want to look for — steady revenue growth, a strong balance sheet, and a progressive dividend policy.

Still, insurance is not exactly a smooth sailing industry. Admiral relies on investment returns to drive profits, so economic instability or fluctuating interest rates are key risks. And that’s not to mention the stiff competition if faces and the regulatory risks. 

The bottom line

Building an ISA portfolio of 10-20 stocks with similar characteristics (but from different sectors) can help reduce risk while targeting steady growth.

A few others top options off the top of my head include Unilever, Tesco, National Grid, GSK, Rio Tinto, and Shell. But there’s one stock I like even more than those right now.

What income stock do we like better than Admiral Group Plc right now?

One of our Share Advisor analysts has just released a brand new stock report that we think is a must-read for any investor looking to try and generate potential income.

And the best bit is that you can see if for yourself, right now, absolutely free of charge!

No jargon. No hard sell. Just a clear look at an income share we think is worth your time.

Mark Hartley owns shares in Admiral Group, Unilever, Tesco, National Grid, and GSK.

The post How a Stocks and Shares ISA can save you from the weak, inadequate State Pension appeared first on The Twelfth Magpie.

According to SharingPensions.co.uk, that’s the average annual income over-65s receive from annuities. Fair enough, but what about the rest of us?

The maths

An annuity means waving your money goodbye in exchange for regular payments. But there’s an alternative route to passive income that lets you keep the money.

That’s not the only important difference. Returns from annuities are taxable, whereas income from a Stocks and Shares ISA isn’t.

Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.

That makes a real difference. For basic rate taxpayers, a Stocks and Shares ISA with a 6% dividend yield needs to be worth around £110,000 to return £7,953 a year.

Outside of an ISA, paying tax on that income takes the required portfolio size up to £132,550. And that means a lot in terms of how long it takes to get there. 

The FTSE 100 average is around 3.4%, so investors aiming for this need to find above-average yields without falling into dividend traps. But I think it might be a realistic ambition.

Starting from scratch

Using the FTSE 100’s 20-year annualised total return of 6.4%, with dividends reinvested along the way, the road to £132,550 looks like this:

It’s well-known that compound interest is a powerful force. But the numbers really bring this out – an extra 10 years cuts the monthly outlay by more than half.

Returns are never guaranteed, even over decades. Other things being equal, however, the benefits of starting early can be huge. 

What to buy?

Admiral (LSE:ADM) is a stock I like very much. I own the insurer in my portfolio and I keep a close eye on it when I’m looking to buy shares.

The headline dividend yield is around 5.7%. But investors who look carefully at the business will note something important.

From the 2026 interim payout, Admiral is replacing special dividends with share buybacks. This is partly because staff bonus schemes have been delinked from the dividend. 

Total returns to shareholders should be unchanged – the firm still expects to distribute around 90% of post-tax profits. But some of it now arrives as a share count reduction rather than cash.

Risks and rewards

The obvious risk is inflation. When repairs and parts become more expensive, margins can erode on car or home policies that were priced months in advance.

Car insurance, however, is a short-tail business. Policies generally renew annually and claims settle quickly. 

As a result, Admiral can reprice its entire book roughly once a year to adjust for rising costs. Compare that with life insurers, where incorrect assumptions can compound for decades.

The unique strength, however, is cost. The firm registered a 2025 combined ratio of 80.1% — while much of the industry sits near 100. That means Admiral keeps 20p of underwriting profit per £1 of premium, while rivals earn nearly nothing. That leaves room to absorb inflation or undercut competitors.

The bottom line

Nobody should buy a stock just because of the yield printed on the screen. Investing is about buying quality businesses at fair prices — and with a widening cost advantage, Admiral is worth looking at.

What income stock do we like better than Admiral Group Plc right now?

One of our Share Advisor analysts has just released a brand new stock report that we think is a must-read for any investor looking to try and generate potential income.

And the best bit is that you can see if for yourself, right now, absolutely free of charge!

No jargon. No hard sell. Just a clear look at an income share we think is worth your time.

Stephen Wright owns shares in Admiral.

The post How much do you need in a Stocks and Shares ISA to earn £7,953 in passive income? appeared first on The Twelfth Magpie.

What makes it interesting is its dividend history. Admiral has paid dividends for 20 years with no interruptions since 2016, and the 2025 dividend increased by 6.77% to 205p per share (compared to 192p in 2024).

So how much income can 100 shares net in 2026?

Crunching the numbers

Let’s break this down. Admiral shares currently cost around £34.62, so 100 shares would cost roughly £3,462. With a dividend yield of 4.8%, that would deliver around £166.27 of dividend income annually.

That’s not exactly life-changing money in the true sense — it’s more like a coffee budget or a modest utility payment.

Compare this with key competitor Legal & General, which offers a 7.77% yield. For the same £3,462 investment, you’d collect around £270 from Legal & General. That’s a notable difference.

Why Admiral stands out

But yield isn’t the only thing. Admiral has several strengths that make it pop.

• Diversified revenues: car insurance is the main business, but home, travel, pet, and personal loans add stability.
• Dividend growth: despite a decrease in 2022, dividends have been steadily growing at around 5.8% on average since 2010.
• Strong returns: 2025 return on equity (ROE) was 53%, and net income margin is 14.79%.
• Valuation: trading at 46.9% below fair value using a discounted cash flow (DCF) model.
• Future yield: forecasts expect the dividend yield to reach 6.3% by 2028.

In my view, those figures project the image of a company working hard to consistently reward shareholders as best possible. But that doesn’t make it risk free — it still faces notable challenges ahead.

Not only is insurance a highly cyclical sector, but competition is fierce. On top of that, the business is highly exposed to cracks in the UK economy, and market fluctuations can hit profitability.

So as always, try to spread risk by investing in several stocks from a diverse range of sectors. Insurance is a popular choice for income due to the high yields, but utilities, healthcare and consumer staples tend to deliver more stable, reliable returns.

The bottom line

Admiral Group is a good stock to consider as a starting point for dividend investing. But even 100 shares won’t deliver life-changing income. At around £166 a year, it’s a modest supplement, not a second salary.

For real income, you’d need to consider a range of stocks from different sectors and reinvest the dividends to compound for years.

Legal & General, Standard Life, and Aviva offer higher yields, but they carry different risks.

The proven method is patient, dedicated investing with regular monthly contributions. That’s how you build wealth over decades, not months. Admiral can be considered as part of that strategy, but it’s only one piece of a bigger puzzle.

Should you invest £5,000 in Admiral Group Plc right now?

When investing expert Mark Rogers and his team have a stock tip, it can pay to listen. After all, the flagship Twelfth Magpie Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.

And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Admiral Group Plc made the list?

Mark Hartley owns shares in Admiral Group, Legal & General, Standard Life and Aviva.

The post Here’s how much second income 100 Admiral shares could deliver in 2026 appeared first on The Twelfth Magpie.

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?

Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.

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?

When investing expert Mark Rogers and his team have a stock tip, it can pay to listen. After all, the flagship Twelfth Magpie Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.

And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Admiral Group Plc made the list?

Simon Watkins owns shares in Admiral.

The post How much would you need in a Stocks and Shares ISA to aim for £8,189 a year in dividend income? appeared first on The Twelfth Magpie.

Admiral (LSE:ADM) does exactly that for a lot of investors. Its 4.8% yield is comfortably ahead of the FTSE 100’s 3.1% average. And buying 500 shares right now would instantly unlock about £793.50 in annual passive income.

So that creates an obvious question for income hunters: can a boring-looking insurer actually turn into a serious passive income machine? And is this even a good idea?

Investigating the dividend

As a quick crash course, Admiral’s best known for car insurance, but it also sells home, travel, pet, and personal loan products. That mix matters because it reduces reliance on a single line of business notorious for expensive claims.

But how does that show up in the financials?

Back in March, the company posted its full-year results for 2025, and they were pretty strong.

Admiral reported pre-tax profit of £957.9m, up 16% year on year, while customer numbers rose 7% to 11.8 million and dividend per share jumped 7% to a total of 205p. Although it’s important to highlight that 46.3p of this was special one-time dividends, putting the real underlying dividend per share closer to 158.7p.

Still, that’s pretty substantial. And with the group’s UK Motor business delivering more than £1bn of profit, the firm appears to be gaining meaningful momentum.

Is it still worth considering?

Admiral’s shown it can underwrite risk carefully, grow customers, and still return plenty of cash to shareholders. What’s more, the company’s solvency ratio stands at 193%, which suggests it still has room to keep supporting distributions while simultaneously investing in the business.

Meanwhile, management’s been pushing harder into multi-product relationships, digital tools, and new growth areas as part of its updated long-term growth strategy.

These actions are already materialising in the financials. And that kind of progress helps explain why institutional investors still see Admiral as more than just an old-school insurer.

It has a history of efficient underwriting, strong customer satisfaction, and a willingness to adapt when market conditions change – three proven winning traits within the insurance sector.

So far, this is sounding like a no-brainer. So what’s the catch?

What could go wrong?

Even with talented leadership, it doesn’t change the fact that Admiral operates in a highly cyclical sector with fierce competition.

In fact, intense rivalry actually caused UK motor insurance premiums to fall throughout the first half of 2025. That’s great for consumers. But for Admiral, it resulted in a slight dip in turnover, proving it isn’t immune to external market pressure.

At the same time, inflation’s a real risk factor, especially for motor insurance, which still dominates Admiral’s policy book. If the cost of parts and repairs climbs due to geopolitical and trade disruptions, higher claims could eat into the firm’s profit margin and, in turn, dividends.

So where does that leave investors? Overall, while the risks can’t be ignored, Admiral still looks like a compelling FTSE 100 income opportunity, in my eyes.

The firm has a strong balance sheet and some of the best margins in the sector, giving leadership some handy flexibility to navigate the market downturns. That’s why I think this business deserves a closer look.

Should you invest £5,000 in Admiral Group Plc right now?

When investing expert Mark Rogers and his team have a stock tip, it can pay to listen. After all, the flagship Twelfth Magpie Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.

And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Admiral Group Plc made the list?

Zaven Boyrazian does not hold any positions in the companies mentioned.

The post 500 shares of this FTSE 100 company unlock a passive income of… appeared first on The Twelfth Magpie.

Dividend yields

High dividend yields can be a sign of risk. But the likes of Legal & General have been pretty consistent when it comes to paying out.

Source: Fiscal.ai

So what are investors worried about? I think a lot of the time, the answer is that they don’t really know. 

Insurance companies are complicated. And that brings uncertainty. Solvency ratios and accounting conventions can be hugely complicated. Even for industry specialists. This, understandably, makes investors wary. And the high dividend yields are essentially compensation for the unknown risks.

My top picks

I’m not claiming to be able to understand insurance accounting better than the specialists. But I do own shares in three insurance companies:

• Berkshire Hathaway
• Molina Healthcare
• Admiral (LSE:ADM)

In dividend terms, these are unusual. Two don’t pay one at all and the third has just lowered its distribution.

The reason I own all of these is the same. I think there’s something unique about each that puts them ahead of the competition. Berkshire has a powerful balance sheet and Molina has the lowest costs in its industry. But with Admiral, it’s something else entirely.

Why Admiral?

Ultimately, insurance is about taking in more money in premiums than you pay out in claims. And Admiral is the UK’s best at doing this. Its underwriting margins consistently lead the industry and that’s no accident. It’s due to the firm having better data than its rivals.

Could artificial intelligence (AI) close this gap? The honest answer is I’m not entirely sure and that creates a risk for the company. The issue isn’t that other insurers will have better data – I don’t think that’s likely. It’s that they might be able to do more with less.

Even if this happens, I still think better data should give Admiral an advantage. That’s why I own the stock, but I’m watching the AI threat closely.

Passive income

The latest dividend from Admiral is set to hit my account tomorrow (5 June). And it’s going to be lower than in previous years. That might look like a sign of weakness, but it isn’t. The firm isn’t making less money, it’s just changing how it uses it. 

It’s going to start channelling cash towards share buybacks to fund its employee compensation scheme. And I’m in favour of that move.

Source: Fiscal.ai

Admiral’s share count has been increasing by just under 1% a year. That somewhat offsets the value of the cash returned via dividends.

Even with the lower dividend, the yield is still above the FTSE 100 average. So it’s still my top choice of the UK insurers.

Being a good investor

Billionaire investor Warren Buffett says that risk comes from not knowing what you’re doing. I think that’s especially true of insurance stocks. It can be tempting to take a high dividend yield in exchange for risks that are hard to quantify. But I think that’s a dangerous strategy.

Far better, in my view, to focus on companies with a clear competitive advantage. That’s why Admiral’s the stock on my to-buy list.

Should you invest £5,000 in Admiral Group Plc right now?

When investing expert Mark Rogers and his team have a stock tip, it can pay to listen. After all, the flagship Twelfth Magpie Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.

And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Admiral Group Plc made the list?

Stephen Wright owns shares in Admiral, Berkshire Hathaway, and Molina Healthcare.

The post Income investors love insurance stocks. Here’s my top pick from the FTSE 100 appeared first on The Twelfth Magpie.

It has a long record of strong earnings, disciplined underwriting, and the kind of dependable cash generation that supports generous, recurring dividends.

So, how much passive income from dividends are we talking about?

Rising payouts forecast?

Admiral’s present dividend yield is 5.2% — well above the FTSE 100’s current average of 3.1%. These returns can go up or down over time, as share prices and annual dividends alter. But analysts project the insurer’s will rise to 5.8% next year and to 6.4% in 2028.

Based on the forecast 6.4% as an average, my £20,000 holding in the firm could earn me £17,865 in dividends after 10 years. The number also assumes the payouts are reinvested in the stock to capture the full supercharging effect of dividend compounding. It is a similar concept to allowing interest to quietly accrue in a bank savings account. But the effect on dividend income over the years can be stunning.

After 30 years on the same basis, this would rise to £115,725. At that point, the holding’s total value (including the £20,000 stake) would total £135,725.

And this would deliver a yearly income of £8,686!

Does the core business support such numbers?

Dividends ultimately rise or fall with the strength of the business itself. This raises the key question of whether Admiral’s earnings engine can keep powering those numbers.

A risk is competitive pressure in UK motor pricing that could limit the firm’s ability to pass on higher costs. This could put downward pressure on earnings momentum. Another is a sharp fall in used‑car prices due to the continued rise in the cost of living. That would mean Admiral gets less money back when it sells the remains of written‑off cars.

Nevertheless, its full-year 2025 results released on 5 March 2026 saw record profits. Group profit before tax rose 16% year on year to £957.9m, highlighting underwriting discipline and improving claims trends.

Earnings per share also increased 16% to 247.4p, underlining the scalability of its capital‑light model. Meanwhile, insurance revenue climbed 9% to £4.98bn, illustrating firm pricing and steady customer growth in UK Motor and Household.

Together, these drivers point to a business with broad‑based momentum and the operational muscle to grow its dividends over time.

My investment view

Admiral keeps proving its ability to turn disciplined underwriting into rising profits and dependable cash returns, in my view.

The latest results show a company with real earnings momentum, capital strength, and a dividend policy that rewards patient shareholders.

I like that Admiral does not need heroic growth assumptions to deliver attractive long‑term income. It simply needs to keep doing what it already does well.

With forecasts pointing to rising payouts and steady, repeatable profitability, the shares look worthy of attention from income‑focused investors.

For me, it remains a high‑quality FTSE 100 name that can anchor a passive‑income portfolio for years to come. Consequently, I will buy more of the stock very soon.

And I have my eye on ultra-high-yielding shares in other sectors too.

Should you invest £5,000 in Admiral Group Plc right now?

When investing expert Mark Rogers and his team have a stock tip, it can pay to listen. After all, the flagship Twelfth Magpie Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.

And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Admiral Group Plc made the list?

Simon Watkins owns shares in Admiral.

The post How much do I need to invest in this FTSE 100 passive income star to aim for £8,686 a year in dividend payouts? appeared first on The Twelfth Magpie.

Despite the Iran War, 2026 has (so far) been another solid year for the stock market. The FTSE 100 index is up 3% since 1 January. Yet a lot of quality blue-chips still offer terrific all-around value.

We’re talking about companies with high dividend yields while also trading at heavily discounted valuations, whether measured by:

• Price-to-earnings (P/E) ratio.
• Price-to-earnings growth (PEG) ratio.
• Price-to-book (P/B) ratio.

Here are two that I’ve spotted: Admiral Group (LSE:ADM) and Barratt Redrow (LSE:BTRW). Want to know why I believe they’re hot bargains to consider?

Value to salute

Admiral offers the dual-benefit of a low historical P/E ratio and a FTSE-beating dividend yield. Its earnings multiple for 2026 is just 12.8 times. That may not exactly be rock-bottom but it’s significantly below the 10-year average, which is 16–17.

Meanwhile, the payout yield is a chunky 5.5%.

Admiral does face mounting risk as inflation rises, pushing up claim costs . But I think the insurer is better placed than many other UK shares to weather this storm.

Why? Its focus on the ultra-stable general insurance market, where revenues remain reliable across the economic cycle. This is especially so in the motor segment, where Admiral leverages its enormous brand power to generate most its earnings.

Crucially, Admiral has other qualities it can use to grow profits despite cost pressures. According to Hargreaves Lansdown notes, these include “its data-led underwriting approach and strong reinsurance relationships.”

Another top FTSE bargain?

The risks to Barratt Redrow have risen sharply since late February. Hopes of interest rate cuts to boost the housing market have disappeared. Now the focus is on potential rate hikes, and the danger this poses to FTSE 100 housebuilders.

Yet I can’t help but think Barratt’s valuation remains too low. I’m drawn in by its 5.5% dividend yield for this financial year. Arguably, it’s even more impressive on other value metrics, including:

• A forward P/E ratio of 10.4, below the 10-year average of 15–16.
• A PEG ratio of 0.1
• A P/B ratio of 0.5.

For the final two ratios, a reading below 1 suggests a share is undervalued. So do the potential rewards of buying Barratt shares at the current price outweigh the risks?

I think so. Over the long term, I believe the stock could snap back as the soaring UK population drives demand for new homes and with it property prices. Estate agent Savills expects average home values to rise more than 22% over the next five years as the market picks up momentum.

Barratt’s enormous land bank puts it in a strong position for when conditions rebound too. It expects to have a hefty 7,000–9,000 plots at the end of this fiscal year.

The post These 5%-yielding FTSE 100 dividend shares are on sale today! appeared first on The Twelfth Magpie.

Most of the decline came on Thursday (7 May) when the stock fell 5.41%. Am I worried? No. Am I buying more? Maybe…

Why Admiral?

The FTSE 100 has a lot of insurance stocks. And the vast majority, I’ve no interest in buying whatsoever.

Admiral, however, is the exception. The reason is simple – it has a massive competitive advantage in a really important industry.

Car insurance is something people have to buy (if they want to drive). And insurance is about pricing risk accurately. 

Admiral’s big advantage comes from its data. Its telematics products give it better information about how people drive than its competitors.

That allows it to be more accurate with its pricing. And it’s why the company’s underwriting margins are consistently ahead of the industry.

What could go wrong?

When it comes to car insurance, I think Admiral is the best in the business. But I’m always aware of what could go wrong.

The most obvious candidate is inflation. If car repairs become more expensive, costs go up and this weighs on profits. 

That’s not the biggest issue – Admiral can adjust its prices the following year. But I’m also mindful of longer-term threats. 

Artificial intelligence (AI) is the thing to keep an eye on. Even with weaker data, it might allow Admiral’s competitors to close the gap a bit. 

That, however, isn’t why the stock fell on Thursday. It’s something much more predictable and much less significant.

What actually happened?

On Thursday, the stock reached its ex-dividend date. So anyone who bought the stock after the open doesn’t receive the next dividend. 

In this case, it’s actually a pretty big payout. It combines a 17p normal distribution with a 73p special dividend for a total of 90p. 

That means the stock on Thursday was genuinely worth 90p less than it was on Wednesday. It’s the same business, but without a 90p distribution.

Admiral shares immediately fell 181p, or 5.41%. But the dividend accounts for half of that leaving a decline of around 2.7%.

On a day when the FTSE 100 fell 1.44%, I’m not sure that’s a big deal. It’s certainly not a huge unjustified sell-off that creates a buying opportunity.

Should I buy it?

I bought my stake in Admiral in February, when the stock was trading at £28.24. After this week’s declines, it’s currently at £31.66. 

On top of this, any shares I buy today won’t come with the next dividend, which is due to be paid in June. That’s also worth noting.

My Admiral stake is currently neither here nor there. It’s not a big part of my portfolio, but I’m ideally looking for a cheaper price.

I’m going to bide my time on this one. That might turn out to be a mistake, but it’s probably better to miss an opportunity than to overpay.

The bottom line, though, is that Admiral shares are down 5.76% this week. But I’m neither concerned by the decline nor looking to seize an opportunity.

The post My top FTSE 100 insurance stock fell 5.76% this week! Here’s what I’m doing appeared first on The Twelfth Magpie.

Suppose you’ve got £15,000 just itching to be put to good use. What dividend income could it deliver for you this year? And what might that grow to become in decades from now?

Crunching the numbers

To calculate potential returns from dividend shares, we need to make some assumptions regarding yield. Fortunately, we can achieve relatively accurate estimates by using typical market averages.

For example, a portfolio of dependable, high-yielding dividend shares could return between 6% and 8% a year. That means an investment of £15,000 could return £900-£1,200. That’s not a bad start. By reinvesting those dividends, the pot would compound steadily, while also benefiting from any increase in payouts.

After 10 years, it could have reached over £39,000 (accounting for average market growth). At that point, it would payout between £2,340 and £3,120 a year.

But is that a realistic goal? With the right stocks, yes it is.

Why careful stock-picking makes a difference

When starting out, investors should consider reliable, well-established dividend-payers such as Imperial Brands, British Land and Admiral Group (LSE: ADM).

The key factors to consider include:

• Earnings coverage.
• Cash flow.
• Debt manageability.
• Payment track record.

In Admiral’s case, dividend payments take up 81.8% of earnings (the full dividend is 2.05p, while earnings per share is 2.5p). That’s a lot of earnings being spent on shareholders. Fortunately, cash flow helps, covering dividends 1.4 times.

Still, that’s only barely sufficient — if profits dipped, it might have to cut or suspend dividend payments. Ideally, it would be better to look for companies with stronger coverage.

Sounds good, so is it worth considering?

On the plus side, Admiral’s been paying dividends consistently for 22 years without a pause. That shows just how dedicated the company is to keep shareholders happy.

This is further supported by the company’s exceptionally high return on equity (ROE), at 53%. However, the balance sheet looks a little stretched, with current assets lagging liabilities by a long margin. This may be due to accounting discrepancies when it comes to insurance but still, it’s worth keeping an eye on.

Long story short? Admiral looks like a highly profitable company that’s happy to return much of those profits to shareholders. However, by doing so, it may be stretching its finances a bit, which is risky.

The bottom line

A solid portfolio of highly-established dividend-payers can deliver far better returns than a standard savings account. But it’s important to weigh up the risks versus the rewards. Some of the best dividend payers push a fine line between maintaining operations and keeping shareholders happy.

A solid track record combined with strong earnings and manageable debt is the ideal combo to look for. In Admiral’s case, I think it’s worth considering because it has a proven history of balancing debt obligations with dividend payouts.

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