Can you afford to miss this FTSE 100 6% yielder?
I've been championing big-yielding Admiral Group(LSE: ADM) for a long time now, reflecting my opinion that a backdrop of ever-improving motor premiums should keep on driving both profits and dividends higher.
It is true that rising competition in the sector is problematic for the Swansea-based business. But I am confident that the FTSE 100 giant still has enough to keep doling out brilliant dividends.
It's not just about Motor
Whilst the company's profits-driving Motor arm may be experiencing increased pressure, conditions here remain favourable enough for Admiral to keep generating profit year after year. What is particularly exciting for the next leg of the insurer's growth story, however, is the progress it is making on international shores.
In a bubbly full-year financial statement in which it reported record pre-tax profit of £405.4m in 2017, Admiral advised last week that the number of international customers on its books leapt 20% to 1.03m. This helped turnover from its operations abroad rise 23% to £449.8m and helped losses to narrow further to £14m. And like in the UK, improving pricing conditions on the continent should help Admiral keep on making steady progress in foreign climes.
Elsewhere, Admiral is also making strong progress in the UK home insurance market and hoovering up market share, and it now has 650,000 households on its books. There remains a lot to be excited about away from the insurer's traditional cash cow of motor insurance.
Bright forecasts
City analysts share my positive assessment and, despite a predicted 1% earnings fall in 2018, Admiral's rosy long-term profits outlook is expected to keep driving dividends skywards.
There is the little matter of the insurer's hulking cash flows to support payout growth in spite of some earnings blips too. Cash and cash equivalents stood at a sturdy £326.8m as of December.
The payment of both ordinary and special dividends in 2017 saw the total payout increase 11% to 114p per share. And in the current year this is predicted to edge to 114.6p per share before a projected 6% earnings increase underpins a bigger year-on-year rise, to 121p.
As a consequence, investors can bask in monster yields of 6.2% and 6.5% for 2018 and 2019 respectively.
Another dividend dynamo
Schroders (LSE: SDR) is another income share that Footsie investors should run the rule over, I believe.
Dividends at the asset manager have almost doubled over the past five years, and City analysts expect this policy to keep on rolling.
Growth is expected to slow in the more immediate term, to 113.5p per share in 2018 from 113p last year thanks to a predicted 1% profits slip. However, thanks to a 6% earnings rise forecast for next year, things are expected to crank into gear again and a 120.5p payout is subsequently estimated.
Therefore Schroders sports healthy yields of 3.4% and 3.6% for this year and next.
The financial colossus continues to go from strength to strength, with profit before tax (and exceptionals) rising 23% last year to £760.2m, and assets under management booming to a record £447m (up 13% year-on-year). And Schroders' drive to continue diversifying its product mix and expanding its geographic footprint should, in my opinion, keep driving profits to the stars.
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What's more, with both Admiral and Schroders carrying pretty undemanding valuations - their forward P/E ratios ring in at 16.1 times and 15 times respectively - I reckon they are too good to ignore right now.
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Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
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