When scouring the FTSE 100 for alternatives, Aviva (LSE: AV) shares by no means fail to leap out at me. However does the insurance coverage large supply probably the most compelling worth of all of the shares within the index?
Low-cost inventory
Let’s begin with the value tag.
I can at the moment take a stake on this firm for the equal of 11 instances FY24 earnings. That’s actually cheaper than the long-term common for FTSE 100 shares.
However, it isn’t fairly so compelling in comparison with a few of Aviva’s sector friends. Shares in Prudential, for instance, commerce at somewhat beneath 9 instances FY24 earnings.
Then once more, it’s essential to look past a single quantity earlier than investing any cash.
Forward of expectations
Based mostly on current half-year outcomes, Aviva seems to be in good type.
Earlier within the month, it revealed a better-than-expected 14% rise in working revenue. This got here in at £875m in comparison with £765m final yr because of an increase normally insurance coverage premiums in Britain and Eire. The market was anticipating round £830m.
All advised, the corporate had practically £400bn in property beneath administration on the finish of June. It additionally stated that it was assured of assembly its full-year targets.
Don’t neglect the dividends!
Its earnings credentials are price mentioning too.
Administration elected to boost the interim payout to 11.9p per share. That’s a 7% bounce on the quantity handed again to shareholders final yr.
Analysts have the overall dividend for 2024 at 35.4p per share. This equates to a dividend yield of seven% — double the yield of the FTSE 100 as a complete.
This not solely makes Aviva one of many largest payers within the index however an actual dividend champion throughout your complete UK inventory market.
Contemplate the dangers
So, we’ve obtained a (pretty) low cost inventory and a beautiful passive earnings stream. What might go mistaken?
Properly, that is investing. A bumpy experience ought to all the time be anticipated.
Aviva has and can proceed to function inside completely aggressive markets uncovered to the occasional catastrophic occasion. Maybe this is the reason there was no fanfare when these aforementioned outcomes have been introduced. Or maybe it’s as a result of the inventory had been thrashing the FTSE 100 in 2024 and among the excellent news was already within the worth.
It’s additionally price remembering that these dividends aren’t assured. Certainly, Aviva has a blended monitor document on this entrance. Years of will increase have been cancelled out by sudden cuts, often the results of a basic financial wobble. The newest instance was through the pandemic.
On a constructive notice, being such a cash-generative firm has meant these interruptions have been pretty transient.
An awesome choice
Whether or not that is the perfect worth inventory within the FTSE 100 is open to debate and never helped by the truth that the index consists of radically completely different companies. It’s a bit unfair to match apples with oranges.
Bearing in mind all the above, nevertheless, I reckon there are quite a bit worse choices for me than investing in Aviva shares immediately if I had the spare money.
CEO Amanda Blanc has made a great job of reducing prices and the sale of extra non-core property going ahead, mixed with that constructive earnings outlook, suggests there might be extra share worth rises forward.
