There are some stocks that regularly head up the ‘most popular buy’ tables from online platform providers. FTSE 100 insurance giant Aviva (LSE: AV) isn’t one of them. However, Aviva shares were top of the pops with investors at Hargreaves Lansdown last week. What’s going on and should I get involved?
Solid performance
In terms of trading, Aviva is having a pretty reassuring 2022. And that counts for quite a lot right now. Last week, it reported a 5% rise in general insurance sales in Q1 to £2.1bn. This was the company’s highest figure for a decade.
Business in Canada was particularly healthy, where gross written premiums rose 10% to £753m. Elsewhere, UK and Ireland Life sales were 2% higher (at £8.4bn) compared to the same quarter in 2021.
In addition to this, Aviva has been busy cutting costs and implementing CEO Amanda Blanc’s plan to streamline the business. No less than £4.75bn of the £7.5bn raised so far through disposals will be returned to investors by the end of this month.
Big dividends
News on the dividend may have also prompted investors to get involved, especially if securing a big income stream was a priority. As things stand, the company has committed to return 31p per share for the current financial year. Using the price of Aviva shares at the end of play last Friday, that becomes a yield of 7.5%
That’s an awfully tempting payout in these inflationary times. By comparison, a simple exchange-traded fund that tracks the FTSE 100 will return about 3.8%. To further sweeten the investment case, Aviva is planning to raise the payout even higher next year, to 32.5p per share.
Not risk-free
There is, of course, no such thing as a risk-free investment. Aviva hasn’t been immune to market volatility. The company’s fund management division (Aviva Investors) saw external net outflows of £200m over the first three months of 2022. It’s certainly not out of the question for this to continue increasing going forward.
Then again, some of this is surely reflected in the price. A price-to-earnings (P/E) ratio of just under eight is low, even for a stock whose fortunes are very much tied to the health of the UK economy.
So will I buy Aviva shares?
Buying any stock just because it’s popular is foolish rather Foolish, in my opinion. Any investment decision must be based on three things: what my financial goals are; how much volatility I’m prepared to endure to achieve them; and how long I plan to stay invested. What’s appropriate for someone else might not be right for me.
Even so, I reckon there is a lot to like here, from the aforementioned chunky dividends and low valuation to the diversified business strategy (encompassing insurance, retirement and wealth management). While 2022 looks like it might be a year to forget on the markets, demand for Aviva’s products and services only looks set to increase. And with 15.4 UK million customers already on its books, the company has a substantial share of these markets.
Although I’m more inclined to snap up bombed-out quality growth stocks right now, I wouldn’t be against adding a bit of diversification to my portfolio with Aviva shares.
