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3 Things To Love About Aviva plc

There are things to love and loathe about most companies. Today, I’m going to tell you about three things to love about FTSE 100 insurance group Aviva (LSE: AV) (NYSE: AV.US).

I’ll also be asking whether these positive factors make Aviva a good investment today.

Chief executive

Mark Wilson became Aviva’s new chief executive on 1 January this year. It looks a good appointment. Wilson has over 25 years experience within the insurance industry “across life assurance, general insurance and asset management, in both mature and growth markets” — so all bases covered there.

Furthermore, Wilson led Hong Kong-based insurer AIA Group from 2006 to 2010, transforming AIA into the leading pan-Asian insurance company. Much of what Wilson will be doing at Aviva is what he did successfully at AIA.

Sustainable dividend

Aviva cut its final dividend by 44% last year to 9p. The company also stated it would cut this year’s interim by the same order. The board said its intention was to ensure that “the current and future dividend is sustainable”.

Within its recent half-year results, Aviva reduced the interim dividend to 5.6p as intended. At a current share price of 400p the trailing 12-month yield is 3.6% — in line with the FTSE 100 average. However, analyst forecasts put the company on a market-beating forward 12-month yield of 4.1%, the expectation being that the board will deliver the targeted sustainable dividend growth.

Progress

It will take improving earnings and cash flow to underpin dividend growth, and Aviva reported “satisfactory progress” on these fronts within the recent half-year results. Profit after tax came in at £776m compared with a £624m loss during the same period last year. Cash flows to the group increased by 30% to £573 million.

The chief executive told us: “There remains considerable value to unlock in Aviva”. If he can execute on his strategy as successfully as he did at AIA Group, shareholders can look forward to a rosy future.

A good investment?

The market has become increasingly confident in Aviva’s prospects, and the shares have soared 23% since this time last year, including a 10% rise during the past month alone.

Despite the uplift, Aviva remains on a value-territory forecast 12-month price-to-earnings ratio of 8.8. Put that together with the forecast dividend income I mentioned earlier and you have an attractive investment opportunity — if the new chief executive delivers.

Aviva is heading in the right direction, but a recovery stock always comes with higher risk. If you’re in the market for a company on an even keel and with a superior dividend, you may be interested in reading about the lower-risk income opportunity featured in this exclusive free report.

This blue-chip opportunity offers a forecast 5.8% yield, and our top analyst believes the shares might be worth 850p versus 734p today — simply click here to download your free report.

> G A Chester does not own any shares mentioned in this article.