As the Aviva share price rises on strong results, should I buy more?

With FY 2023 coming in better than most of us expected, is the Aviva share price set for further gains? I think the stock is still cheap.

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Image source: Aviva plc

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After a boost from 2023 results, the Aviva (LSE: AV.) share price is back where it was when I first bought some. It has been higher before, but I think we could be in for a few good years now.

On 7 March, the insurance giant posted a 9% rise in operating profit. And the dividend is up 8%, for a 7.3% yield on the previous close.

I’d say a dividend rise that beats inflation in these times is a top result.

Cash bounty

The past few years at Aviva have all been about cutting costs, boosting cash flow, and making the firm a whole lot slimmer and fitter. And it looks like the plan is paying off.

The company says it’s been able to “to deliver our £750m cost reduction target a year early.

This all leads to what I rate as the biggest headline move. In the words of CEO Amanda Blanc: “This momentum gives us increased confidence for Aviva’s future, and so today we are announcing a new £300m share buyback programme, upgrading our dividend guidance to mid-single-digit cash cost growth, and upgrading our group financial targets.”

Most important?

What’s the main thing we should look for in this sector?

Some might say the dividend. That’s what I wanted when I bought some all that time ago, and it’s what I’ll want if I buy more this year. And I’ve had some decent cash that way, even while the share price has been weak.

Others might point to earnings. But those can be erratic in this sector. It has bad years, and we just can’t get round that. And earnings measures — including things like the price-to-earnings (P/E) ratio — are only short term.

For me, I’d say the thing that matters most in this business is liquidity.

Liquidity

On that front, all looks good. Aviva posted a 12% rise in operating own funds generation (Solvency II OFG), with an 8% gain in operating capital generation (Solvency II OCG). And the return on equity (RoE) figure came in at 14.7%, up from 9.9%.

Still, while it looks like 2023 has been very good on this front, I do worry a bit about the near-term future.

Results like these might be hard to match. And I’m sure that some years will come in quite a bit below this. It just comes with the ride, with so many external threats beyond Aviva’s control.

A weak year in 2024, or 2025, and I think we could see the share price pushed down again. I mean, we only need to look at all the false starts it’s had in the past 10 years or so.

ISA buy?

So what’s my take on all this? The nature of the business means Aviva could only be a very long-term buy for me. And the whole sector is still not out of the woods yet, not while inflation and interest rates are still high.

But buying more Aviva is on my Stocks and Shares ISA wishlist for 2024, for sure.

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.

Alan Oscroft has positions in Aviva Plc. 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.

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