Stock Purchase – Admiral Group

On Monday 10th November 2014, I bought 104 shares in the FTSE 100 insurance company Admiral Group. The share price at the time of purchase was 1200.58p. The total cost with charges included was £1,266.79. 

I usually report back on what the average dividend yield has been over the last 5 years for each of my purchases, and I get this information from my broker. Unfortunately my broker doesn’t include ‘special dividend’ payments in the yield, and in Admiral’s case it greatly impacts their total. Admiral have paid an increasing special dividend for over 10 years, and their special dividend has been more than the regular dividend for 8 out of the last 10 years (2005 and 2006 were lower). I’ve take the time to manually calculate the yield based on what the share price was at the close of the final payment of each year.  Here are my findings – Admirals dividend average over the last 5 years was 5.86%. Their dividend at the end of May 2014 was priced at 6.82%. It’s worth noting that the share price at the end of May 2014 was 1458p. At my purchase price the yield would be 8.29%.

The dividend payment increased every year for the last 10. I used the same data to calculate the dividend growth rate. Over the last 5 years the average growth rate was 14.05%. The most recent increase was 11.21%
Their average dividend cover is 2.07 over the last 5 years, and for 2014, the dividends were covered by 2.23

Arguably, the most convincing set of data I read on Admiral was found on a website I highly recommend – UK Value Investor. The writer John Kingham wrote a post on The 10 Most Progressive Growth Stocks In The UK. John found that Admiral had increased their Book Value (value of company according to their balance sheet), Dividends, and earnings per share (indicator of companies profitability) every year for the last 10. The article also found that the companies growth in all of these areas was averaged out to 15.1% over the last 10 years. I’m very encouraged to see such consistent positivity across earnings, book value, and dividends.   

The share price is the lowest it’s been since December 2013. The share price rose to it’s 52 week high in July this year at 1574p. At the point of purchase, the share price has declined 24%I believe it now offers a great opportunity. The company are paying a dividend in excess of 6%, it has shown consistency in paying increasing dividends, their book value and earnings per share are consistently increasing and there is now a possibility to make capital gains from an increase in share price. 

 
What do you think of Admiral Group as an investment right now? Have you invested in them? Would you?

0 Comments

  • Hi Huw
    Interesting that you went for Admiral. In the Insurance (Non-Life) sector of my HYP I instead recently (Aug-14) grabbed Amlin (AML) and my better half grabbed Catlin (CGL). If you did consider these as alternatives I'd be interested to know why you preferred ADM?
    Cheers
    RIT

  • Huw Davies

    Reply Reply 17th November 2014

    Hi RIT,

    I also purchased Catlin back in August as it happens and Amlin are a company that are on my watchlist too. I would say that Admirals growth and consistency in earnings and dividends stood out more than the other two. The share price was also right at the bottom of the 52 week low, and I think they now offer great value.
    Amlin and Catlin have showed fairly consistent growth in these areas, but the growth hasn't been as high nor as consistent as Admirals over the last 10 years. These are just some of the things I consider when purchasing stocks.

    Non-life insurance investments are very solid. It's a competitive market place, but the returns are high, the debt levels are very low, if not zero. and they tend to be defensive, steady growers overall. I think the three of us have our hands on solid investments.

    Thanks for stopping by.
    Huw

  • Ben

    Reply Reply 19th November 2014

    Hi Huw,

    Sounds like a good buy and appears at an attractive valuation at the current price. Admiral's revenue growth over the last decade has been impressive and as you say, the dividends have been consistently growing at a good rate over that time too.

    It will be interesting to see if the special dividend continues to be paid but even if it was removed the yield would be just under 4% which is good regardless, especially when you consider the growth of the company etc.

    All the best with your latest buy and your onward progress.

    Ben

  • Huw Davies

    Reply Reply 19th November 2014

    Hi Ben,

    Thank you for your comment!

    I believe Admiral are a stable company to invest in based on the financials I like to look out for – Earnings, profits and dividends over a ten year period. There is always a possibility that a Special Dividend might not go ahead, but like you said there is cover in that area. They've paid a special dividend every year they've paid an interim and final dividend too, so it looks like they're likely to continue that trend. (Fingers crossed anyway!).

    Thanks for stopping by, and the kind words. All the best!

    Huw

Leave A Response

* Denotes Required Field