All hail Aviva (LSE: AV) shares! They’ve been a standout performer in the FTSE 100 in recent past, delivering impressive growth and robust dividends.
While some stocks give investors high income, and others deliver heaps of growth, Aviva has done both. In spades.
Over the past year, Aviva’s share price has risen a modest 13%. Over five years though, it’s up a mighty 125%. That’s roughly double the FTSE 100’s 58% gain over the same period.
Can it continue to beat the FTSE 100?
Better still, Aviva has consistently offered an attractive dividend yield, typically ranging between 6% and 7%, compared to the FTSE 100 average of about 3.5%.
Past performance figures should always be approached with caution, especially these. Five years ago, the world was in lockdown and markets were in freefall. I wouldn’t expect an established blue-chip operating in a mature and competitive market, as Aviva does, to deliver a similarly stellar return over the next five years.
There’s still plenty to admire. Full-year 2024 results, released on 27 February 2025, showed operating profit climbed 20% to £1.77bn. The board is aiming for £2bn by 2026. It als rewarded investors by hiking the total dividend per share by 7% to 35.7p.
The £3.7bn acquisition of Direct Line is expected to enhance Aviva’s market position, potentially making it the UK’s largest home insurer and a leading player in motor insurance. But let’s not count our chickens just yet. Mergers can be complicated and don’t always unleash the expected value.
As the cost-of-living crisis drags on, general insurance will remain intensively competitive, while today’s volatile stock markets could hit assets under management.
Typically, a strong share price run shrinks the dividend yield, but Aviva still pays 6.45% on a trailing basis. Forecasts suggest this could rise to 6.77% in 2025 and 7.28% in 2026.
Dividend income and growth too
FTSE 100 financial rivals like Legal & General Group and Phoenix Group Holdings offer higher yields of 8.2% and 9.2% respectively, but their share price performance has been vastly inferior.
So can Aviva maintain its momentum? Its diversified product range across insurance, wealth and retirement leaving it nicely placed. It should benefit from the aging population, as people have to make more pension provision themselves.
Analysts aren’t getting too excited though. The median target price for Aviva shares over the next year is 590p, suggesting a modest increase of just under 5% from today. Combined with the yield, this implies a potential total return of around 12%. Good but hardly stellar.
I’m also concerned that some of the recent share price growth is down to takeover speculation, with European insurers including Generali, Allianz, Intact Financial and Tyrg rumoured to be hovering. CEO Amanda Blanc dismissed it all as “market chatter”.
Sadly, I could no longer describe Aviva shares as a bargain, with a price-to-earnings ratio of almost 24. I still think it’s arguably the FTSE 100’s finest all-rounder though and well worth considering today but with a long-term view.
Of course, that’s just my opinion and Aviva may be played out after recent successes but investors who consider it could happily reinvest those juicy dividends while they wait for its next run of form.
