Aviva shares are up over 20% in 12 months! Here’s what I’m doing now

Jabran Khan details the rise of Aviva shares recently and decides if at current levels the stock would be a good addition to his holdings.

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The Aviva (LSE:AV) share price has risen over the past 12 months. At current levels, would Aviva shares be a good addition to my portfolio? Let’s take a closer look at why the shares are on the up and if I should add some to my holdings.

Aviva shares rising

Aviva is the UK’s largest insurance firm and serves over 15.5m customers. Insurance is a staple for consumers and businesses alike and shouldn’t be affected even in times of economic uncertainty.

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As I write, Aviva shares are trading for 394p, whereas a year ago shares were trading for 323p. This is a 21% return over a 12-month period. It is worth noting that at current levels the share price is almost identical to pre-crash levels.

I believe the share price has been rising due to positive trading, as well as the effects of a new strategy to streamline operations and more emphasis on rewarding investors.

The bull case

Aviva announced last year that it was to undergo a transformation whereby it would look to offload certain businesses within the group. This would allow it to focus on core territories such as the UK, Canada, and Ireland. It has been working hard to successfully do this and in the past two months alone has confirmed sale of its Italian and Polish businesses. The reasoning behind this was to offload businesses that perhaps weren’t yielding the best performance and profitability. If this strategy pays off, the core territories mentioned should yield more profit, which could lead to better investor returns.

In addition to this, Aviva also confirmed it will use the proceeds from the sale of its businesses to pay down debt, invest in core territories operations but perhaps more tellingly, reward shareholders. It committed to return £4bn to investors by the end of 2022, which included a share buyback scheme. This will have definitely boosted Aviva shares recently.

Performance has been positive recently too. A Q3 update released last month made for good reading. Aviva reported good progress in all its divisions, but Savings and Retirements and General Insurance had risen most compared to the same period last year, which stood out to me. Growth and efficiency targets were on track for its full-year guidance. Of the £750m share buyback scheme mentioned, £450m has been completed by this point, which was confirmed in the report. 

Risks and my verdict

Aviva’s current transformation is complex. Selling businesses as well as rewarding investors with proceeds and paying down debt is easier said than done. Any negative news could affect performance and payouts. Furthermore, current macroeconomic issues such as rising inflation and currency headwinds linked to the pandemic and Brexit could affect this strategy as well as performance and payouts. 

Overall I like Aviva shares for my portfolio and would happily buy the shares at current levels. Aviva has a clear strategy in place to streamline operations and is committed to rewarding investors. It currently has a dividend yield of close to 4% which would make me a nice passive income. This is higher than the FTSE 100 average of 3%. At current levels, the Aviva share price looks like a bargain too.

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Jabran Khan has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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