This 6.4%-yielding FTSE 100 stock is near a 52-week low! Time to buy?
The FTSE 100 is home to a wide range of dividend-paying stocks. But among these, Admiral Group (LSE:ADM) currently stands out with its impressive 6.4% yield.
The UKâs leading motor insurance group was on a bit of a winning streak, climbing by around 70% between the start of 2023 and the summer of 2025. But since then, the shares have taken a hit, dropping by just over 20%.
Seeing some profit-taking activity after a prolonged rally is nothing out of the ordinary. And this sell-off is one of the primary factors behind the stockâs now generous dividend yield.
So does this dip present an exciting buying opportunity for investors? Or is there something sinister going on?
Whatâs going on with Admiral?
Admiralâs initial outperformance was largely driven by prudent strategic decision-making from management. When inflation came knocking, Admiral was one of the first insurance companies to start raising its policy rates.
While it temporarily made the company less competitive, the firm sucessfully adjusted its strategy to reflect the rising level of underwriting risk. After all, higher inflation drives up claims costs due to more expensive vehicle repairs.
Eventually, its competitors followed. But this late response from rivals means that Admiral was able to eventually lower prices much faster than its peers, stealing market share in the process and securing some of the best efficiency metrics in the UK motor insurance sector. That in turn drove stronger share price and dividend gains.
Skip ahead to 2026 and we seem to be approaching the end of another cycle. The ongoing global surge in industrial metal prices is once again driving up repair costs. Yet insurance prices continue to fall in a fiercely competitive marketplace.
In other words, the level of underwriting risk is once again on the rise. And Admiral may soon face increased cyclical pressure on its profit margins. With that in mind, itâs not so surprising to see some investors start to get nervous.
Bull vs bear
The cyclical risk surrounding Admiral canât be ignored. And while the company has yet to report its full-year results for 2025, the experts at Goldman Sachs are now anticipating a 17% drop in earnings per share throughout 2026 due to the wider macroeconomic insurance landscape.
However, itâs important to recognise that Admiral’s still the top dog in this sector with over 11 million customers on its roster. When this scale is combined with capital-light operations, Admiral enjoys significantly more operating leverage versus its peers, paving the way to superior free cash flow generation.
In other words, while margins are likely to come under pressure, the impact could be far less severe than its peers. Not only does that help support dividends, but it also means Admiral could enjoy yet another strong rally once the cycle shifts back into recovery mode in 2027 and beyond.
Thatâs why I think Admiral shares are worth a closer look at todayâs discounted price. But itâs not the only FTSE 100 income stock on my radar right now.
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Zaven Boyrazian has no position in any of the shares mentioned. The Motley Fool UK has recommended Admiral Group Plc. 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.
