The Aviva share price is climbing in 2022. Here’s what I’d do

The Aviva share price has had a good couple of years, but we are facing a tough economic outlook now. Here’s why I’m holding on to my shares.

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The Aviva (LSE: AV) share price is up 6.5% so far in 2022. That’s not one of the year’s biggest winners, for sure. But it is ahead of the Footsie with its mere 1.7% gain. And over the past two years, Aviva is up 80%.

Considering the financial sector took a big hit when Russia launched its war on Ukraine, I think this emphasises the robustness that Aviva shares have been showing in recent years.

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Over 12 months, Aviva is up 9%. And looking back to that two-year trend, May 2020 was right in the depths of the Covid-19 crisis and the whole market had been hammered.

Aviva share price momentum

While the Aviva share price has since soared by 80%, the FTSE 100 made just 30% over the same period. Am I seeing a change in sentiment towards Aviva? I think I am.

For years, Aviva had been seen as a bit bloated, but the company has been working on a restructuring plan. Chief executive Amanda Blanc described 2021 as “a year of significant strategic progress, right across Aviva“.

She pointed out that the firm had completed the sale of eight non-core businesses, adding that “Aviva is now a much simpler, leaner business, focused on our core markets in the UK, Ireland, and Canada“.

Restructuring result

That’s exactly what institutional investors had wanted for years. And I think it goes some way to explaining the recent Aviva share price resilience. That progress was held back by the pandemic, though, which seriously hammered the financial sector.

As a result, Aviva’s earnings fell in 2020 and 2021. And the 2019 dividend was slashed as a provision against possible financial weakness. But it came back in 2020, and was upped further in 2021. The 22.05p per share would provide a yield of 5% on the current Aviva share price.

That’s not the biggest dividend in the FTSE 100. But it was strongly covered by earnings. And if we’re looking at the start of a sustainable progressive dividend policy, I think it could be among the most attractive today.

Aviva has since completed a £1bn share buyback, and there are further capital returns on the way. To me, that shows the company’s confidence in its balance sheet strength.

Optimism vs risk

Am I coming across as optimistic? Maybe that’s partly down to having owned the stock for some years now. And the Aviva share price is still a little below what I originally paid. Still, I’ve had some nice dividends to compensate to some extent.

And there are definitely risks facing Aviva today. Primary among them, I think, is the worsening global economic outlook. In a highly competitive market, that could squeeze the demand for asset management. Any pressure on dividends could hit the Aviva share price.

For Aviva specifically, I’m seeing the potential for the slimmed-down company. But we haven’t seen the proof of the pudding yet. Until we’ve had some sustained earnings growth, the stock could remain weak.

But on balance, Aviva is a firm hold for me.

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Alan Oscroft has positions in Aviva. The Motley Fool UK 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.

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 considered, so you should consider taking independent financial advice.

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