I’m searching for the best FTSE 100 bargain stocks to buy in September. Aviva (LSE:AV), whose share price has slumped in the year to date, is one I’m aiming to add to my portfolio. Its dividend yields, which march towards 10%, are too tantalising to ignore.
Here are five good reasons to buy Aviva shares right now.
1. Low earnings multiples
Aviva’s plummeting share price means is now trades on a rock-bottom price-to-earnings (P/E) ratio.
City brokers expect the company to move back into profit this year, resulting in a multiple of just nine times for 2023. This is well below an average of 14 times for FTSE 100 shares.
Pleasingly its low P/E ratio is expected to move even lower, to 7.7 times and 7 times, for 2024 and 2025, respectively. This reflects expectations that annual earnings will rise by double-digit percentages over the period.
2. Demographic opportunities
Aviva’s share price has slumped as fears over the UK economy have grown. During economic downturns spending on wealth, protection, and investment products can fall.
But I’m tipping profits here to surge once current conditions pick up. People are taking an increasingly proactive approach to saving for their retirement as funding of the State Pension becomes tougher.
There is huge upside here in the coming decades as the country’s elderly population rapidly grows, too.
3. Brand strength
Having a strong brand power is essential for all businesses. It’s one of those famous economic moats that legendary investor Warren Buffett searches for when selecting which stocks to buy.
Positive customer recognition is especially important when it comes to money. And fortunately Aviva has this in spades, giving it an edge against much of the competition. It explains why the business is the UK’s biggest life insurance provider with a market share of around 20%.
4. A brilliant cash creator
Aviva’s balance sheet is in rude health thanks to the sale of non-core assets in recent years and ongoing heavy streamlining. Its Solvency II capital ratio remained above 200% as of June. Meanwhile, the company’s ‘own funds’ under solvency rules jumped 26% year on year to £648m.
Strong cash generation gives the insurer extra strength to navigate industry downturns. It also provides the firm with money to invest in areas like digitalisation and product development to drive future growth.
Finally, the business has the financial clout to continue rewarding its investors. Speaking of which…
5. A generous wealth sharer
Aviva has a great track record of paying dividends that are well ahead of the index average. Its decision to raise the interim dividend by 8%, to 11.1p per share, suggests its progressive dividend policy remains in great shape.
City brokers certainly expect shareholder payouts to continue growing for years to come. This means that a large dividend yield of 8.7% for this year rises to an even better 9.2% for 2024 and 9.7% for 2025.
The firm also remains keen to keep returning excess cash to its investors through share buybacks. In the first half of 2023 it repurchased another £300m worth of its own shares.
Aviva shares tick a lot of boxes for me as a long-term investor. And at current prices I think they are too cheap to resist.
