Aviva (LSE: AV.) shares looked attractive to me towards the end of last year. I was impressed with the group’s more streamlined operation and thought there was an attractive dividend on offer. So I invested.
How’s this FTSE 100 insurance stock got on so far in 2024? Let’s take a look.
An outperforming stock
Firstly, for those unfamiliar, Aviva’s a leading insurer with major businesses in the UK, Canada and Ireland. It offers life, health, and general insurance (auto, home, travel, pet, etc), as well as asset management services. Nearly 5m UK customers have more than one policy with the firm.
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The share price started the year at 434p. As I write, it’s at 495p. That’s an impressive year-to-date gain of 14%, and it’s almost twice the return of the FTSE 100.
I didn’t stick £10k into the stock, it was less than that. But if I had, I’d now be sitting on £11,400. Plus, there was a dividend of 22.3p per share dished out in May. That would have paid me around £513, taking my total return to nearly £12k.
There’s also a dividend of 11.9p coming in October and that would pay another £274.
Strong H1 results
On 14 August, Aviva reported that its overall general insurance premiums increased by 15% year on year in the first half, with an 18% rise in the UK and Ireland. Operating profit jumped 14% to £875m, which was better than the £830m expected by the market.
Meanwhile, its Solvency II capital ratio, a key measure of financial strength, was 205%. This indicates that the firm has more than double the capital required by regulators to cover its insurance obligations.
Although this is very strong, it did fall by 2% compared to the previous year. This slip doesn’t worry me though.
Commenting on the results, CEO Amanda Blanc said: “Sales are up. Operating profit is up. The dividend is up…. We have generated growth right across Aviva, thanks to our leading positions in attractive markets such as workplace pensions and general insurance in the UK and Canada.”
A juicy dividend
Investing in this stock doesn’t come without risk however. Fluctuations in interest rates and economic downturns can impact its insurance and investment businesses.
Meanwhile, there’s a lot of competition within the industry, especially in the UK where it has the bulk of its customers. It’s a mature market, so I wouldn’t expect double-digit growth every single year. It could even go ito reverse.
Nevertheless, the dividend looks attractive to me. The forward yield‘s now above 7%. While a cut can never be ruled out, the payout appears sustainable. The interim dividend in October will be 7% higher than last year, while the firm’s intention is for “further regular and sustainable returns of capital“.
Looking ahead, Aviva’s aiming for £2bn a year in operating profit by 2026, up from £1.7bn in 2023.
The stock looks good value trading at around 10.7 times forecast earnings for 2024. Pair that with the 7% dividend yield and I still think this is an excellent FTSE 100 value stock to consider for a portfolio.
