September has actually been a great month for Aviva (LSE: AV). The FTSE 100 insurer has seen its share worth hit the very best degree since 2007. Which may make it sound as if Aviva shares have turn out to be costly. However one one that doesn’t appear to suppose so is the corporate’s chief govt. She has spent tens of 1000’s of kilos of her personal cash this month including to her shareholding within the agency.
So, regardless of having been on such a terrific run of late, may it nonetheless make sense for traders to think about Aviva shares?
I believe it does.
A powerful passive revenue prospect
Again in 2020, Aviva took an axe to its dividend and lower the payout per share by round one third.
For a mature firm in a considerably sleepy business, that was unwelcome information for a lot of shareholders who had been attracted by the share’s passive revenue potential.
What has been extra welcome is the regular stream of annual will increase within the dividend per share since then. The corporate goals to maintain them coming, though dividends are by no means assured to final at any enterprise.
Due to these common will increase, the Aviva dividend yield stays greater than aggressive. Although Aviva shares have grown 141% in 5 years, they at the moment yield 5.4%.
Robust enterprise with long-term progress prospects
That’s nicely above the FTSE 100 common of three.3%.
Nonetheless, it’s not excellent: different FTSE 100 monetary insurers additionally supply excessive yields, together with insurer Phoenix Group. It yields 8.6%.
Nonetheless, every share must be thought-about on its particular person deserves. On that foundation, I see Aviva as a share value contemplating.
The marketplace for insurance coverage is massive and prone to keep that method. It’s simple to give attention to the downward strain competitors can place on revenue margins. However as latest years have proven, British insurers have substantial scope to lift premiums with out essentially dropping a number of enterprise.
Aviva has been in progress mode in its core UK market, with the acquisition of Direct Line providing it the possibility to increase its market share and add economies of scale.
Strategic focus has been delivering
On high of that, in recent times, the corporate has slimmed down its once-sprawling abroad operations to focus extra sharply on chosen worldwide markets.
That has been working nicely as a technique, though it will increase the focus danger Aviva faces. Its elevated reliance on the UK market implies that any issues there – comparable to a worth warfare – could possibly be problematic for market chief Aviva.
There are different dangers, too. Direct Line had a interval of underperformance earlier than it was acquired. Sorting the enterprise out may take numerous administration time at Aviva. To this point, although, the corporate has been constructive concerning the progress of the Direct Line integration.
On steadiness, Aviva seems to be to me like a well-run and extremely money generative enterprise. Even on the latest worth, I believe it is smart for traders to think about Aviva shares.
