Intensifying competition is causing some tension over the scale of future profits generated by the likes of Direct Line Insurance Group(LSE: DLG) and its rivals, as I explained in a recent piece looking at the car insurance segment.
The FTSE 100 business, like its competitors, is expected to see earnings growth slow as a consequence of these pressures, and an 8% bottom line rise is forecast for 2018, down from the double-digit rise of last year.
However, I am convinced Direct Line has what it takes to overcome the worst of these problems and to keep its allure as a blue-chip dividend king.
Last month's full-year financial update certainly affirmed my positive take on Direct Line's investment case.
A combination of strong profits expansion and a robust balance sheet encouraged the business to hike the final dividend by more than 40% to 13.6p per share, resulting in a meaty ordinary dividend of 20.4p for the whole of the year. More good news was to come as the Footsie firm slapped a 15p special dividend on top of this.
And City analysts expect further dividend progress in the near-term at least. An ordinary dividend of 29.5p per share is currently anticipated, meaning Direct Line sports a monster yield of 7.6%. And this does not include the strong possibility of additional special dividends further down the line.
Strength across the board
As I said, Direct Line isn't going to have everything its own way as the market becomes more and more competitive. However, the vast amounts the firm has invested in its own brands are helping business to boom and should continue to do so.
The insurance colossus saw the number of in-force policies rise 3.8% during 2017, to 4m. This, combined with the increasingly favourable rate environment for Britain's car insurers, helped premiums to surge 8.5% year-on-year to £1.67bn.
Meanwhile, Direct Line is also enjoying strong demand for its other insurance lines, with the number of its own brand Home policies growing 2% in 2017, to 1.8m, and the number of active Commercial policies improving 4.9% to 708,000.
Direct Line currently changes hands on a forward P/E ratio of just 12.2 times. This is far too cheap, in my opinion.
Another income hero
Those on the lookout for exceptional dividend shares should also consider stashing St James's Place (LSE: STJ) in their ISA before the deadline passes.
Although the FTSE 100 asset manager is expected to see earnings slip 4% in 2018, its bright long-term profits outlook and its robust balance sheet is expected to encourage it to turbocharge the dividend to 47.8p per share from 42.86p in 2017.
As a result the yield clocks in at a market-mashing 4.2%. And there is good reason to expect payouts to continue marching higher. The company chalked up record annual gross inflows of £14.6bn last year, and I expect demand for St James's Place's services to continue booming as Britain's ageing population decides where to invest its money.
It may be expensive, the firm rocking a forward P/E multiple of 22.2 times. But I reckon the entity is worth a princely premium on the back of its strong momentum.
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.