Weather-hit Direct Line still a dividend king

Direct Line (DLG) has built on the strong momentum announced at the full-year figures in February during its first quarter, despite having taken a hit from the recent cold snap.

Indeed, the annual weather budget has effectively now been used, putting the company in a potentially uncomfortable situation.

Meanwhile, price competition within the industry remains at a heightened state, and the decline in gross written premiums is something of a setback, as evidenced by the initial share price reaction.

Source: interactive investor       Past performance is not a guide to future performance

Even so, growth in its own brand policies was strong, whilst both the combined operating and capital ratios are sound. The company’s cash generation and confidence in prospects has resulted in a punchy dividend yield of 5.4%, with the projected yield looking likely to nudge an eye-watering 8%.

The company is one with a close eye on margins and profits, and the strength of its brands, mostly household names, make it a market leader. Its absence from comparison sites gives Direct Line something of a competitive and strategic advantage, and the shares have risen accordingly, up 8% over the last year as compared to a 4.4% hike for the wider FTSE 100 (UKX).

Stripping out the tinge of disappointment in the update, the group’s potential remains evident and the market consensus of the shares as a ‘buy’ should remain in place.

These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties. The content is not intended to be a personal recommendation, and is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company’s or index name highlighted in the article.

Source.