With 86% annual dividend progress, I had so as to add this FTSE 100 inventory to my passive revenue portfolio

On the subject of passive revenue, I often inform myself to not get swept away by dividend yields alone. Chasing the largest payouts generally is a fast method to stumble right into a entice. However when a FTSE 100 inventory boosts its yield from 3% to six% within the area of a yr, I can’t simply shrug and stroll away.

That’s precisely what occurred with Admiral Group (LSE: ADM). In August, the insurer hiked its interim dividend from 51.3p to 85.9p per share. That’s an 86.4% improve, the form of determine that makes even probably the most cautious investor sit up. And in contrast to many companies that find yourself providing excessive yields as a result of their share value has collapsed, Admiral’s case seems to be very totally different.

Once I purchased earlier this month, the share value was up 26% yr on yr. That instructed a level of power. However nearly as quickly as I took the plunge, the inventory slipped by 6.5% in simply a few weeks. That left me questioning if I’d jumped in too early.

A difficult sector to navigate

The UK insurance coverage sector is nothing if not unpredictable. Over the previous month, Phoenix Group has dropped round 10% and Authorized & Basic is down 8%. In contrast, Prudential is up 4% and Beazley has surged 10%. It’s a reminder that not all insurers face the identical pressures.

Admiral’s current wobble appears tied to particular occasions. In early September, Peel Hunt downgraded the inventory to a Promote, pointing to weakening underwriting margins. Analysts additionally flagged softening rates of interest as a threat, probably squeezing returns on the funding facet of the enterprise. These warnings doubtless triggered a wave of promoting.

Nonetheless, there’s one other facet to the story. Most dealer scores stay constructive, with the common value goal sitting round 3,472p — about 9.5% larger than at this time’s ranges. And when digging into the numbers, Admiral’s fundamentals look robust.

Income is up 22.6% yr on yr, whereas earnings have greater than doubled with a 106% improve. Web revenue in FY 2024 nearly doubled from the earlier yr too. Sure, the stability sheet carries debt, however profitability is spectacular. The corporate’s return on fairness (ROE) stands at a hefty 65.3%. That’s the sort of determine that implies administration is aware of learn how to generate returns.

Margins have narrowed barely between H2 2024 and H1 2025, so the issues aren’t baseless. If earnings have been to shrink considerably, the dividend may come below strain. That’s the largest threat, for my part.

Pondering long run

Quick-term share value jitters don’t hassle me an excessive amount of. When investing for revenue, I’m much more targeted on the monetary power of the corporate, its dividend coverage, and its observe file of payouts. On these measures, Admiral is engaging.

Falling rates of interest may dent income within the close to time period, however I believe traders ought to weigh up Admiral’s resilience. Over a 10-year horizon, it seems to be like a robust candidate for a passive revenue portfolio. For me, the possibility to lock in a 6% yield with a agency that’s simply delivered practically 90% dividend progress was too good to disregard.