The Aviva share price is finally rising. Time to buy?

The Aviva share price is finally seeing some positive momentum. Paul Summers takes a look at the FTSE 100 giant’s latest trading update to find out why.

| More on:

Image source: Aviva plc

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.

The Aviva (LSE: AV) share price was on the front foot on Thursday with investors seemingly pleased with the insurance and wealth manager’s latest trading update.

I wonder if this may be the beginning of a sustained recovery.

Ahead of schedule

CEO Amanda Blanc stated that the £11bn cap had “delivered nine months of strong growth”, and it’s hard to disagree.

Despite facing the consequences of a tricky few weeks of adverse weather, general insurance premiums rose 13% to £8bn.

Elsewhere, the company reported a 26% jump in its workplace pensions business as a result of adding more than 350 corporate customers to its books and higher auto-enrolment contributions as wages rose.

Underlining the company’s diverse set of services, health sales also jumped by 56%.

Positive outlook

Looking ahead, Aviva said it still expects 5-7% growth in operating profit in 2023, assuming we don’t get any freak meteorological events for the rest of the year.

The company went on to say that it was “on track to exceed” its targets for the medium term. This includes delivering £750m in cost savings one year early.

So, I can see why the shares are reacting well to this news. Indeed, I would have expected a greater gain in the share price had it not been released on a day when the UK’s blue-chip index was struggling.

Fortunately, none of this really matters to a long-term-focused Fool.

8% dividend yield!

For me, the main reason for adding Aviva to my own portfolio remains the dividend stream.

In its latest statement, the company said it was committed to returning 33.4p per share to owners in FY23. Assuming this comes to pass, Aviva shares yield a meaty 8%. This would make it one of the biggest payers in the FTSE 100. Speaking of which, that yield is also double what I’d get if I just bought a bog standard fund that tracked the return of the index.

Naturally, that extra cash doesn’t come without taking on more risk. Notably, the share price has underperformed the FTSE 100 in 2023, making that higher yield look pretty redundant.

Moreover, Aviva has something of a chequered history when it comes to the amount of money it distributes to shareholders. A few years of hikes have typically been followed by the occasional (and substantial) cut.

Then again, one could argue that a suitably diversified portfolio should be able to take this sort of event in its stride.

A cautious buy?

The Aviva share price hasn’t been in great form for most of 2023. However, this latest update coupled with a slowly improving outlook on the economy suggests to me that investors may be past the worst. At this point, I’ll insert the caveat that no one truly knows what will happen next.

On which note, a still-reasonable valuation means Aviva could actually find itself subject to a formal takeover offer before long, as rumoured last month. This should never be the sole reason to invest, in my book. But the mere whiff of interest could provide a much-needed boost.

Based on what we do know, however, I’d consider buying the stock today if I were looking for a set of shares to deliver income and had the spare cash to buy.

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.

Paul Summers has no position in any of the shares mentioned. 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.

More on Investing Articles

Young black man looking at phone while on the London Overground
Investing Articles

Is buying one of the best performing FTSE 100 stocks in 2023 wise right now?

Volatility has hurt many FTSE 100 stocks. Is one of the better performing shares on the UK’s premier index a…

Read more »

Young Caucasian woman with pink her studying from her laptop screen
Investing Articles

Is the Shein IPO a nightmare for the boohoo share price?

It was revealed today that Chinese fast fashion giant Shein is preparing to go public in the US. What now…

Read more »

Aerial shot showing an aircraft shadow flying over an idyllic beach
Investing Articles

Is the easyJet share price set to soar in 2024?

The easyJet share price is lower today than in the 2020 stock market crash. Can that be right? Might it…

Read more »

British bank notes and coins
Investing Articles

Should I buy M&G shares for the 9.8% dividend yield?

With the M&G dividend yield close to double digits, this existing shareholder explains why he'd happily buy more of the…

Read more »

British Isles on nautical map
Investing Articles

This cheap UK stock could rise 30%, the City says

Analysts covering Serco Group shares reckon they could rise by over a quarter. But is this UK stock a good…

Read more »

2024 year number handwritten on a sandy beach at sunrise
Investing Articles

Here’s how I’d aim for a million by investing £45 a day

Christopher Ruane thinks putting £45 a day into blue-chip shares could help him aim for a million. Here are some…

Read more »

Light trails from traffic moving down The Mound in central Edinburgh, Scotland during December
Investing Articles

I’d buy FTSE 100 shares in December before the next stock market rally!

Christopher Ruane explains why he would happily snap up cheap FTSE 100 shares between now and the end of the…

Read more »

Businesswoman calculating finances in an office
Investing Articles

6% yield and 8% annual revenue growth! A passive income opportunity

Why not have the best of both worlds? Our writer explores a passive income opportunity with a 6% yield, bolstered…

Read more »