Looking at an Aviva (LSE: AV.) share price of 396p makes me want to buy some more. The stock is cheaper now than when I bought back in 2015, which is scary.
But we have had all sorts of crises since then. And at least I’ve had some decent dividends, even if they’ve been up and down a bit.
Legal & General (LSE: LGEN) is also a long-term favourite among the UK’s insurers, and I’m wondering which might be the better buy right now.
Share prices
It looks like Aviva has had the worst time in the past five years. But it had problems of its own well before Covid arrived, and it’s been through a period of restructure.
I’d say Aviva is a lot leaner and fitter now. But I also think Legal & General looks like a top long-term buy.
In today’s economy, both still share the same kind of risks. And as I buy for dividends, I’m wary that those could easily be cut. If that happens, it could damage these share prices.
But then I’d say both their valuations also look very low. Do they have enough safety margin to cope with the risk? I’m not sure. Here’s how the two insurance stocks line up:
| Company | Aviva | Legal & General |
| Recent share price | 396p | 237p |
| 1-year change | +1.5% | -4.6% |
| 5-year change | -39% | -11.1% |
| P/E ratio | 7.4 | 8.4 |
| Dividend yield | 8.0% | 8.7% |
| Market cap | £11.1bn | £14.4bn |
Those price-to-earnings (P/E) ratios look low, and the dividend yields are high. And there’s more.
Analysts have them both down to grow their earnings per share by more than 20% by the end of 2025. And they expect similar dividend rises of around 10% in the same time.
I try not to put too much store in broker forecasts, mind. Often, in times of change, the City can be very late to spot the new reality the rest of us can see clearly.
Top sector?
Saying that, I have reasons to think this year and next could be good for the financial sector.
According to research by investment firm AJ Bell, financial stocks should make up the lion’s share of this year’s profits rises. It’s mostly banks. But insurers and other finance firms tend to move in line with them.
And both Aviva and Legal & General are in the top 10 FTSE 100 stocks for 2023 in terms of dividend yields.
Cover by forecast earnings looks good at about 1.6 times for both. And that’s a lot better than some others on bigger yields.
Top value
So which is better value now? Well, the two business are pretty similar, with both firms involved in insurance and investment services.
And it’s hard to split them apart based on valuation and forecasts.
Despite the short term risks, I’d be happy to own either. So a top-up of Aviva, or a new purchase of Legal & General? Both are on my shortlist for my next stock buy.
