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My top passive income stock for dividend investors to consider buying in 2026 is Admiral (LSE:ADM). The FTSE 100 firm is an outstanding operation that I think is just getting better.
I’m generally not a fan of insurance companies (despite their high dividend yields) but there are two exceptions and this is one of them. I’ll tell you the other one at the end.
The class of the field
The most important thing I look for in a stock to buy is a durable competitive advantage. With the majority of insurers, I find it nearly impossible to detect meaningful signs of this.
Admiral, though, has a record of achieving better underwriting results than its rivals. And this isn’t an accident – it comes from having more data about its drivers and using it more effectively.
That’s not something that I anticipate changing, so I see the stock as an opportunity. And I think the 5.5% dividend yield is something passive income investors should take note of.
It’s not just the company as a whole that I’m impressed with – I also rate the way management has been running the business. Specifically, I like the recent move to exit the US division.
Focusing on core strengths
Earlier this year, the company announced plans to sell off Elephant – its US business. Its plan is to focus on its core operations in the UK and Europe and I think this makes a lot of sense..
It’s always tempting for a firm to try and grow as much as possible. But the US market is a tough one for Admiral, for several reasons that don’t look likely to change any time soon.
Most notably, it lacks the scale to compete with bigger companies. On top of this, the capital requirements that come with operating in the US make it less attractive.
As a result, Admiral’s decision to sell of Elephant and use the cash for debt repayment and share buybacks looks like a good one. And that should be a benefit for the business in 2026.
Macroeconomic issues
One thing to keep an eye on in 2026 specifically is the macroeconomic environment. The Bank of England has just cut interest rates and that’s not really a good thing for Admiral.
Lower interest rates increase the risk of inflation, which can make claims more expensive. The firm can reprice most contracts after a year, but it can’t respond instantly to higher costs.
It also potentially means lower returns from investments. As a result, Admiral and others will have to be more conservative with their underwriting to maintain profits.
That can be a challenge for growth and it’s something investors should keep an eye on. But in a tougher insurance environment, I think the firm is in a better position than its rivals.
Dividend income
The other insurance stock I like is Berkshire Hathaway. Like Admiral, I can see what puts the company in a stronger position than its rivals.
Unlike Admiral, though, Berkshire doesn’t come with a 5.5% dividend yield. And that means income investors are less likely to find it attractive.
For Admiral, lower interest rates might create challenges in the near future. But in terms of long-term passive income, the stock is my number one choice right now.
