Will the Admiral share price reach £35?

first_img Insurer Admiral (LSE: ADM) is well-known from its television adverts. The cartoon admiral often peers through his telescope. Inspired by him, I am going to peer through my own telescope and examine prospects for the Admiral share price, close up.Admiral’s business modelAdmiral is one of a number of listed UK insurers such as Direct Line, Legal & General, and Sabre. What makes insurance companies as a class attractive to investors?5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…And if you click here we’ll show you something that could be key to unlocking 5G’s full potential…Typically an insurance company has large capital needs. Sometimes it will need to pay out substantial claims that it needs to be able to meet. Insurance pricing is often cyclical. So sometimes, new premiums do not cover claims that need to be met.But in good years, an insurance company generates surplus cash, as it takes in more as premiums than it pays out to settle claims. That can be paid out as dividends, which many investors value.I find insurance companies are often good as income picks. They may not have compelling growth stories, but a steady drip of dividends can make them attractive. Admiral’s yield of 4% meets this part of the usual investment case for insurers, in my view. It’s not the best in the sector, but it’s still substantial. If I invested £10,000 at the current Admiral share price, I would be hoping for a prospective passive income stream of £400 annually from its dividends. Of course, dividends are never guaranteed.A resilient business modelLast year’s results help demonstrate the attractiveness of Admiral’s business model. Pre-tax profits jumped 21% to £638m, as many motorists drove less than usual. Earnings per share of 179.5p covered the dividend of 156.5p adequately. The company’s dividend policy is to pay out 65% of post-tax profits as an ordinary dividend. It sets aside some funds for items such as business development and to meet regulatory requirements. It then pays out any surplus as a special dividend.That means that the dividends can be substantial, but not smooth. The total payout typically jumps about from year to year.Can the Admiral share price hit £35?The Admiral share price has put on 30% in the past year.That has been a strong performance. The market seems to appreciate the sharp jump in profits last year. I would like to receive emails from you about product information and offers from The Fool and its business partners. Each of these emails will provide a link to unsubscribe from future emails. More information about how The Fool collects, stores, and handles personal data is available in its Privacy Statement. Learn how you can grab this ‘Top Income Stock’ Report now The Motley Fool UK’s Top Income Stock… Will the Admiral share price reach £35? Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we’re offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our ‘no quibbles’ 30-day subscription fee refund guarantee. Simply click below to discover how you can take advantage of this. We think that when a company’s CEO owns 12.1% of its stock, that’s usually a very good sign.But with this opportunity it could get even better.Still only 55 years old, he sees the chance for a new “Uber-style” technology.And this is not a tiny tech startup full of empty promises.This extraordinary company is already one of the largest in its industry.Last year, revenues hit a whopping £1.132 billion.The board recently announced a 10% dividend hike.And it has been a superb Motley Fool income pick for 9 years running!But even so, we believe there could still be huge upside ahead.Clearly, this company’s founder and CEO agrees. christopherruane has no position in any of the shares mentioned. The Motley Fool UK has recommended Admiral Group. 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. Image source: Getty Images. Our 6 ‘Best Buys Now’ Shares Christopher Ruane | Friday, 14th May, 2021 | More on: ADM Enter Your Email Address Can the Admiral share price keep moving up? Its high point over the past year was around £32.57. That also marked the all-time high for the Admiral share price. The company’s share price has broadly moved upwards in recent years, so I do think it’s possible it could hit £35.However, I also see some risks that could stop the climb. With more motorists on the road again, many of whom haven’t driven much for a while, I expect claims to increase. That could hurt Admiral’s profitability.Another risk is a shift away from pre-pandemic travel patterns. With an expectation people will commute to the office less, many drivers won’t be on the road as much. They might shop around for lower mileage policies. That could cut revenues and profits.My action plan for the Admiral share priceSo while I do think the Admiral share price could hit £35 eventually, I don’t see immediate drivers to get it there.I like the company’s yield, but prefer higher yields elsewhere. For now, I am not buying Admiral shares. See all posts by Christopher Ruanelast_img read more