The Aviva share price has bounced back from a recent dip! Here’s what I’m doing now

Jabran Khan delves deeper into the Aviva share price which has bounced back from this month’s dip. Should he add the shares to his holdings?

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Many FTSE stocks have dipped recently since rising inflation worries, the cost of living crisis, and the tragic events in Ukraine have impacted worldwide markets. Aviva (LSE:AV) is no different. As I write, the Aviva share price has recovered since 7 March lows. Should I add the shares to my holdings? Let’s take a closer look.

The Aviva share price bounces back

Aviva is known as the largest insurance business in the UK. It has over 15m customers throughout the UK. Aviva offers car, home, health, and life insurance as well as investment products. Insurance is a must for consumers and businesses alike. Due to this I believe despite economic uncertainty, insurance demand shouldn’t be affected.

As I write, Aviva shares are trading for 438p. At this time last year, the shares were trading for 397p, which is a 10% return over a 12-month period. A 12-month picture does not tell the whole story, however. The recent pressure on stocks saw Aviva shares fall as low as 374p on 7 March. The Aviva share price has increased by 17% in just over two weeks to current levels.

For and against investing

FOR: Aviva has often been seen as a bloated business. Well, in the past couple of years, it has decided to sell non-core business and focus its efforts on key markets such as the UK, Ireland, and Canada. Sale of non-core businesses has led to it declaring the proceeds will pay down debt, help reinvest in the restructure, as well as reward investors via dividend payments.

AGAINST: There is a downside to creating a new streamlined profitable business. It sounds simple on paper and in theory. There is still lots of work to do and there is a lot of negative investor sentiment despite recent moves. I think a couple of years of positive results showing profitability and consistent returns will provide me with a better picture as to whether or not the restructure is working for Aviva.

FOR: The current Aviva share price offers a dividend yield of over 5%. It is worth mentioning the FTSE 100 yield average is 3%-4%. Dividends are an attractive prospect as they would help me make a passive income from my holdings. A recent share buyback scheme introduced by Aviva would boost this.

AGAINST: Despite looking like a good dividend option for my holdings, it is worth noting that dividends can be cancelled at any time. I think the ongoing restructure could paint a clearer picture as to whether or not consistent progressive dividends would be paid. This uncertainty is off-putting.

What I’m doing now

When a large business decides to restructure and become leaner and more focused, it is hard to execute plans and the future can seem uncertain. To date, Aviva has sold eight non-core businesses, returned capital to shareholder, and has vowed to continue to do so.

I believe the Aviva share price will increase in the coming months but only steadily. I believe investor sentiment will improve after another few set of results, perhaps next year’s annual results. Currently, I’d happily add Aviva shares to my holdings. Aviva shares possess an enticing dividend yield and the restructure does look to be working. I will keep an eye on developments and future results, however.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

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.

More on Investing Articles

Investing Articles

Up 670% in 2 years! This former penny share is skyrocketing on SpaceX contracts

Shares of Filtronic (LON:FTC) were soaring to multi-year highs today after another contract win with SpaceX. Should I buy this…

Read more »

Investing Articles

Why is the Greatland Gold (GGP) share price up 10% today?

Our writer looks at the reasons why the Greatland Gold (GGP) share price is the AIM 100’s best performer today.

Read more »

Passive income text with pin graph chart on business table
Investing Articles

What do I need for a passive income of £100k a year?

How much would I need to invest to collect a very healthy yearly passive income on my retirement? Surprisingly, the…

Read more »

US Stock

£2k invested in Nvidia stock 2 years ago is now worth this boggling amount…

Jon Smith details how much unrealised profit an investor would have from buying Nvidia stock but is cautious about what…

Read more »

Investing Articles

2 value stocks that still look cheap despite the FTSE rally!

Harvey Jones picks out two UK value stocks that still look nicely priced even as the UK index climbs. He…

Read more »

Dividend Shares

I asked ChatGPT to build the perfect passive income portfolio and here’s the result

Jon Smith turns to the world of AI to try and find out whether ChatGPT could build an investor a…

Read more »

Investing Articles

£20,000 to invest? Here’s how the FTSE 100 could deliver a £2,040 passive income

Here are two ways that investors with a lump sum to spend could target a large passive income with FTSE…

Read more »

Runner standing at the starting point with 2025 year for starting in new year 2025 to achieve business planing and success concept.
Investing Articles

Here’s how someone could start investing in 2025 with just £1,000

Planning to start investing in 2025? This writer highlights two very different stocks that might be worth considering for a…

Read more »