2 of the top income and growth stocks in the FTSE 100

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Admiral insurance TV advert dolls

Shares in FTSE 100 insurance giant Admiral(LSE: ADM) slumped by as much as 8% in early deals this morning after the company published its first half results. The numbers were broadly positive, and the company seems to be dealing with the higher costs stemming from personal injury claims well. 

This year, the government changed the so-called Ogden rate, a discount rate that helps determine payouts for personal injury claims, from 2.5% to -0.75% resulting in higher costs for motor insurers. The total bill for this change is expected to cost Admiral £150m in total, which the company has already made provision for. Higher costs held back the group's growth for the period with pre-tax profit rising by just 2%. Revenues increased 8% to £550m as the number of customers using the group's products rose 13% year-on-year.

Overall during the first half, Admiral managed to grow the number of clients using the group's UK insurance services by 11% to 4.3m and the number of international customers using the company's car insurance services rose 27%. Even though Admiral's international arm is tiny compared to the group's UK presence, it's growing rapidly and is a vital part of the strategy to expand out of the mature UK insurance market.

Unfortunately for dividend hunters, Admiral cut its interim dividend payout by 11% to 56p. Nonetheless, even with this lower payout, the shares are still on track to yield 5.5% for full-year 2017.

Room for growth 

Admiral is one of the UK's best run insurance companies and over the past five years, the group has returned almost all of its profit to investors via dividends. Management plans to continue this cash return policy, and at the same time the company is investing overseas which should help drive profit and earnings growth. For example, the company's US business only insures 180,000 vehicles but is growing customer numbers at a rate of 18% per annum. It's this overseas growth that will drive Admiral's expansion in the years ahead.

That said, shares in the firm trade at a forward P/E of around 18, which may be too expensive for some investors. So if you're looking for a cheaper income stock, Aviva(LSE: AV) might be a better buy. 

Cheap income

Shares in Aviva currently trade at a forward P/E of 9.5 and support a dividend yield of 5.2%. City analysts have pencilled in earnings per share growth of 37.9% for 2017 as the company's turnaround finally reaches a conclusion.

Over the next few years, Aviva will reinforce its position in the UK market and analysts are expecting the firm to return to steady growth. Analysts also believe the company will ratchet up its cash returns to investors. Now its recovery is complete, Aviva is generating plenty of excess cash, and at the end of May, the firm announced a £300m share buyback alongside its already generous dividend policy.

With a dividend yield of more than 5%, a P/E of less than 10 and more cash than it knows what to do with, Aviva looks to me to be one of the best income and growth stocks in the FTSE 100.

The easy way to a million

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Rupert Hargreaves owns shares in Admiral Group. 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.