Monday, 28 April 2014

Insuring a growing 6% yield with Amlin

Hunting for yield? Look no further than Amlin!

Want a 6% income that should grow? Like companies with long-term track records of growth and high profitability? Like “value” companies that trade on as P/E of 10x or less?

Then Amlin (code AML.L) is an excellent UK company for you to look at!

Who is Amlin?

Despite the fact that Amlin is a member of the FTSE Mid-250 index and sitting at a market capitalisation of £2.2 billion, you would be forgiven for never having heard of them.

Amlin is an insurance and reinsurance company that operates in Lloyds of London. It provides insurance cover to companies in the following areas: Catastrophe Reinsurance, Marine and Aviation Insurance, Commercial & Domestic Property & Casualty insurance as well as International P&C.

Geographically the company operates globally with main markets being North America, Continental Europe and also the UK.

Three reasons to Like Amlin: 6% Yield, growth record, profitability

First of all, the income – a prospective 6.1% dividend yield for this year based on the current share price of 442p. There is little reason to expect this dividend not to be paid at this level, given that:

The expected dividend of 26.9p is well covered by expected earnings per share of 42.7p;
Amlin has maintained or grown its dividend each year for each of the last 10 years (Figure 1), making it it is what I call a “dividend aristocrat”.


Source: Bloomberg

So if you like regular and growing income, Amlin is a good choice.

Secondly, long-term growth. Amlin grown its dividend steadily over time by an average of 27% per year since 2003, and is forecast by analysts to grow its total dividend further by 4% both this year and next.

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