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The Aviva (LSE: AV.) share worth has been doing what I by no means anticipated to see it do – skyrocketing. It’s up 29% over the past 12 months, 63% over two years and 152% over 5 years.
Whereas different FTSE 100 financials are doing properly, none can maintain a candle to Aviva. I do know, as a result of I maintain them. Sadly, I don’t maintain Aviva.
It hasn’t simply delivered development in spades, it’s been doling out dividends too. The trailing yield has dipped barely, however solely due to the surge in share worth. Traders are nonetheless pocketing 5.63% a 12 months, which is way from shabby.
Sharper, leaner, stronger
The enterprise has remodeled below CEO Amanda Blanc. She’s offloaded underperforming abroad property and honed in on the core UK market. The £3.7bn acquisition of Direct Line ought to double down on that.
We noticed the advantages in Aviva’s full-year outcomes, printed on 27 February. Working revenue rose 20% to £1.77bn and the dividend climbed 7% to 35.7p a share. Aviva is now concentrating on £2bn of working revenue by 2026. Normal insurance coverage premiums and property below administration each grew strongly.
The corporate additionally clocked up document bulk buy annuity gross sales of £7.8bn and a 42% spike in safety gross sales, helped by the acquisition of AIG’s UK safety enterprise. Blanc is now leaning into capital-light development, which now drives 56% of working revenue.
One other sturdy quarter
The sturdy efficiency carried into 2025. In Q1, printed in Might, normal insurance coverage premiums, wealth internet flows, retirement gross sales and annuity revenues all flew. So did safety and medical insurance gross sales.
Blanc reckons Aviva is in “nice form”, and I can see why. The steadiness sheet is strong, the product vary broad, and the client base is now 17m sturdy. The agency says it’s assured in hitting all its medium-term monetary targets.
There’s a catch. With the shares at an 18-year excessive, I’m now questioning how a lot additional this may run. Twelve analysts have a median one-year worth goal of 649.2p, simply 2% above right this moment’s 634p. That displays my concern that the share worth beneficial properties could sluggish from right here.
Revenue nonetheless rising
On the plus aspect, dividends are forecast to develop once more, with a yield of 6.04% in 2025 and 6.48% in 2026.
But the valuation offers me pause. The trailing price-to-earnings ratio is a frothy 27.5, suggesting the inventory is priced for perfection. That’s all the time a threat.
One other concern is that Aviva is closely centered on the UK, which isn’t precisely in impolite well being proper now. It operates in a extremely aggressive sector, and rivals can be battling laborious to compete and play catch up. At right this moment’s valuation, any earnings miss might be punished.
Nonetheless, 10 out of 14 analysts price it a Purchase or Robust Purchase. If I held it, I wouldn’t be in a rush to promote. However with the shares wanting absolutely valued, I’d be cautious of opening a brand new place at this worth.
That stated, for long-term dividend traders, there’s nonetheless so much to love. And with a yield this sturdy, some may think about shopping for anyway, even when the fireworks fade a little bit.
