The Aviva (LSE: AV.) share price has enjoyed a lot of success lately. Like many, the stock hit the floor back in 2020. But in the last few years, it has made a strong recovery.
This year we’ve seen it rise 11.8%, trumping the 6.8% gain put up by the FTSE 100. It’s risen an impressive 27.9% over the last 12 months. And its 22.4% rise over the last five years is nothing to scoff at either.
That hasn’t come without a few ups and downs. Investing always does. But at today’s price of 484.5p, I’m watching Aviva closer than ever.
Here are two reasons why I’m strongly considering adding the insurance giant to my portfolio.
Turnaround
It has been a rough couple of years for the insurance sector. High inflation and interest rates have translated to low investor sentiment.
But behind all of that, Aviva has been making great improvement with its turnaround strategy. And that leads me to reason number one.
For years the business has been criticised for being bloated. But under CEO Amanda Blanc, that all seems to be changing.
Under her tenure, the firm’s fortunes have been revived. The business has trimmed its fat to focus on its core markets.
Operating profit rose 35% in 2022. It jumped 9% in 2023. In its latest Q1 update, Blanc spoke of how the business is “in great health”, “financially strong”, and “trading well”. It’s hard to argue with that.
Income
Reason number two is for the income on offer. At its current share price, Aviva has a 6.9% dividend yield, nearly double the FTSE 100 average.
Last year its total dividend rose 8% to 33.4p per share. Its forward yield for this year is 7.1%. That’s forecast to rise to 7.8% in 2025 and 8.4% the year after.
Alongside its 2023 results, the business upgraded its dividend guidance to “mid-single-digit cash cost growth“. It announced a £300m share buyback programme. In its latest release, it said the programme was “progressing well”.
While dividends are never guaranteed, those are all positive signs. With that, I’m confident Aviva is in a great place to keep steadily growing its payout.
The risks
I mentioned earlier that the last few years have been tough. That reveals one risk with the stock: it’s cyclical.
On top of that, as impressive as its turnaround has been, it does pose threats. For example, with it streamlining to focus on core markets, that makes it more reliant on them. Should they experience a downturn, this will have a larger impact on the firm.
My move
But at its current price, I reckon Aviva could be a steal. The insurance sector can produce spells of volatility. So, if I were to buy the stock today, I’d do so with the intention of holding it for the long term. By that, I mean at least five to 10 years, but ideally a lot longer.
But that suits me. With the business building strong momentum, I’m keen to buy some shares sooner rather than later. In the weeks to come, I plan on adding the insurance stalwart to my portfolio.
