Aviva plc Dives 15% After Cutting Final Dividend From 16p To 9p Per Share

I dont think you will see any article from Stephen as he has parted company with TMF again but he may comment on the boards

Vodafone dividend cut must also be on the cards.

I imagine that more companies, even the ones doing really well, may well cut or slow their dividend growth in the future if only because we are living through a period when IR's for cash on deposit with a bank will be low for a long time. We have effectively turned Japanese, and 6-10% dividend yields will probably drift down closer to market averages for cash savings. That's not to say that there still won't be opportunities to buy good dividend yields, but companies may feel they want to use the money elsewhere. This is essentially what Aviva says in its statement, although it is of course an excuse to cover up their poor performance as well.

For those that rely on the divi' it will be increasingly difficult to find big ones that you can trust. Value traps like Aviva and RSA often bite back and while the dividend still looks good, the capital side can erode away quickly. Still, I suppose it depends at what price you initially bought in.

Agree. The new CEO is a turnaround artist who has already slashed a lot of operational stuff. I thought the cut would be higher. No point in hating a company that is now finally being managed properly when we loved the poorly run one at £4

Argh. Frustrating.

Would love to buy more, but am already overweight Aviva.

Should average down.

Stephen Bland must be tearing his hair out. Oh, thats right, it was never real money in the first place! Sorry Stephen, couldnt help myself.

The headline yield has been screaming "UNSUSTAINABLE" for a long time, so this was no surprise to me. But looks like it was a surprise to the market with the share price dropping 15%.

I'd like to say what a great investor I am because I bought at 300p and sold, just a few months ago, at 381p - but the truth is I know there was a sizable amount of luck involved.

However, I was waiting for the price to come down before buying in again - I just didn't anticipate it was going to come down so far - and now seems a good time to get on the rollercoaster again

This is a real shame for investors, hope nobody was too severely caught out by this news.

Sadly it's another indication of how difficult the UK insurance industry is to operate in, something reflected in the similar news at RSA recently. The sheer volatility and inconsistency of shareholder returns in the sector from year to year can be very tough on investors.

It's especially a shame because of the intentions of investors entering the sector - sensibly and logically being attracted to good value, high income opportunities. Never pleasant to see legitimately sensible analysis end with a poor result.

However, I think looking at the historical operating results of the sector shows that these lean times come quite frequently - long-term investors have faced turbulence and poor returns for several decades now.

Similar to the situation at RSA, Aviva's long-term stock price decline reflects the serial business disappointment suffered by shareholders. Per-share earnings are some way lower than those enjoyed by investors in the 1990s, while the business has endured per-share operating losses in a number of years since then.

The dividend record might be of particular interest to current investors, who sadly have been faced with severe cuts in the past too. Having peaked at 40p per share in the late 90s, in 2002 the dividend was cut 40% to 23p. Despite climbing back to 33p, the latest cuts to 9p per share demonstrate that long-term decline in expected shareholder returns, and tough business performance.

This is very hard on the investors who have entrusted their hard-earned savings for seemingly high rates of income return. Ultimately though, despite the efforts of management, the long-term record shows how hard it is to operate in the UK insurance business. The economics of the industry are just very unfavourable. The dividend record sadly will always reflect a business' performance in the long-run.

While the next ten years may be different, I would suggest that hope for change (rather than precedent) would be the main factor in an investor's decision today. That involves a speculative element that puts investors at a disadvantage, in my opinion.

I wish everyone the best of luck with Aviva, and hope that management can turn it around. They face an enormously difficult task, and I admire the loyalty shown by investors here in such hard times for the company!

Koochak - Good questions. I must emphasise that I'm not an investor in Aviva, and that I personally did not find value in the offered rates, although these matters are subjective.

However, I think it may be somewhat harsh to blame ordinary investors for being attracted for legitimate investment reasons - even if those reasons fail to materialise, they were well intentioned.

Afterall, there are far more questionable ways to approach investment in securities. Many top professional income investors would have been hurt by today's news, I would imagine. I believe the investments made here were well intentioned, even if not entirely sound. For that reason, it's hard not to feel disappointed for those who have endured the turbulent business performance at Aviva.

But as laid in the comment above, we would mostly agree that long-term business analysis would not have led us to a positive investment decision, either before or after today. I do stress though that this is a subjective matter - investments can make us all look foolish or Foolish in our time.

If Stephen has parted company with The Motley Fool again, what's the bad news?
That he didn't go before pretending to invest ~75% of his make-believe money into a fantasy portfolio without making it plain it was just a paper exercise!
I expected Bland results, but not a dividend cut and a 15% price drop. There's no fool like a Motley Fool, but I've learned not to trust any advice, nor tips, nor supposed examples from anyone, thanks to Stephen.

On the other hand, Standard Life and LGEN have done very well.
I held the latter for years before switching to Aviva for the high yield.
Peter Lynch said that there are only two reasons to change your name: when a woman marries, or if you want people to forget, like Norwich Union and Sellafield!

I don't own any shares on Aviva, but have read with a surprise how many people seem to be blaming someone else for their potential losses. If investors are following TMF recomendations blindly thinking there is guarenteed profit to be made, well you may as well just put your money on a roulette wheel. We also have to take the rough with the smooth - take Aggreko for example, up 10% today - recomendation made just last week - luckily I bought in before the dramatic rise in share price - (nice) problem is now whether to sell and lock in my profit before the market correction comes along........