Picture supply: Getty Pictures
Now appears like a terrific time to go looking for FTSE 100 shares and Aviva (LSE: AV.) appears particularly tempting.
We’ve seen the insurance coverage stalwart outpace the Footsie yr up to now, rising 10.6% in comparison with 7.2%. It additional trumps the lead index over a 12-month and five-year timeframe too, up 17.6% and 16.4% in comparison with 8.6% and 12.9% respectively.
That might depart some traders feeling like they’ve missed out. The very last thing I need to do is make investments when a inventory’s peaking, just for it to be pulled again. Fortunately, I don’t see that taking place.
Undervalued?
Its shares commerce on 12.7 occasions earnings. That’s simply above the FTSE 100 common, so it could not leap out as a discount. Nevertheless, it’s cheaper than it has been, with its historic common being 14.
Whereas dealer forecasts aren’t all the time dependable, the 12-month goal value for Aviva is £5.17. That’s an 8.1% premium from its present value and highlights that the inventory may very well be nice worth at the moment.
Passive revenue
There’s additionally the potential to make some juicy passive revenue with Aviva. The inventory yields 7%, manner above the Footsie common of three.6%.
Which means a £10,000 funding within the inventory at the moment would pay me £700 a yr in dividends. If I reinvested these dividends and bided my time, let’s say over 20 years, by then I’d be incomes £2,723 a yr in curiosity. I’d have a pot value £40,387. That’s assuming its yield remained the identical throughout that point, which isn’t essentially assured as dividends may be lower or, hopefully, rise.
That’s not a nasty potential return. In reality, there’s solely a handful of shares on the Footsie that provide a better payout than Aviva. Its administration additionally appears eager to reward shareholders. I prefer to see that.
Following a powerful 2023 not solely did it announce a contemporary £300m share buyback scheme however it additional upgraded its dividend steerage. It now expects its payout to rise by mid-single digits. For potential traders, that’s attractive.
A robust yr
Final yr proved to be affluent for the enterprise. Working revenue rose 9% to £1.47bn whereas it made good progress with its capital-light companies, which makes up over half of its portfolio. For 3 years in a row now Aviva has grown gross sales, working revenue, and its dividend. The enterprise is gaining some actual post-pandemic momentum.
The challenges
After all, there are challenges I see. The progress made has been aided by its streamlining mission however that comes with threats. By decreasing its geographic footprint to concentrate on its core markets it makes itself reliant on these. Any blips in them might spell bother for the inventory.
We’re not out of the woods but and financial uncertainty surrounding points equivalent to rate of interest cuts additionally pose a menace to the Aviva share value.
An thrilling future
However Aviva appears to be turning a web page beneath CEO Amanda Blanc. She’s made stable strides since taking on in 2020. I reckon it may very well be an thrilling few years forward for the enterprise.
At its present value, and with its meaty yield, Aviva definitely appears like a inventory that’s value contemplating shopping for at the moment. If I had the money, I’d be eager so as to add it to my portfolio.
