I first bought Aviva (LSE:AV.) shares due to its credentials as a robust dividend stock. But with its share price ballooning 82% since I opened a position in October 2023, it’s proven to be a terrific source of capital gains as well.
My only regret is not buying more shares in the FTSE 100 insurer. Today’s latest trading update shows that it continues to build momentum.
Another great update
On Thursday (14 August), Aviva’s share price gained another 4% on the release of exceptional half-year numbers.
They showed operating profit up 22% in the six months to June, at £1.07bn. Trading was strong across the group: at General Insurance, premiums rose 7%, to £6.3bn.
Meanwhile, aggregated sales across its Insurance, Wealth and Retirement operations increased 9% to £21.5bn.
Aviva’s balance sheet also remains in rude health. Its Solvency II cover ratio remained more than double the regulatory minimum above 200%. In fact, it rose 300 basis points over the year to 206%.
This encouraged a 10% hike in the interim dividend, to 13.1p per share.
On the right track
Aviva’s momentum is impressive and especially in the context of a tough economic backdrop. But can it keep delivering? Weak growth in its key UK and Irish marketplaces could start slowing its pace. So could a steady rise in inflation.
But I believe the Footsie firm can continue delivering. For one, its broad product range gives it multiple red-hot structural trends to exploit.
Driven by rapidly ageing populations and a growing need for financial planning, inflows into Aviva’s wealth division are rocketing. The firm now manages £200bn worth of assets. In another example, its health business provides opportunities to capitalise on those demographic changes (as well as famously long NHS waiting lists) — in-force health premiums grew 14% in the first half.
I’m also encouraged by Aviva’s strong record of execution. Expansion into capital-light businesses puts the firm on track to hit its operating profit target of £2bn by next year and further boost cash flows.
That cash-rich balance sheet also gives the company ammunition for more earnings-boosting acquisitions like Direct Line.
Growth, dividends AND value
I may be regretting not buying more Aviva shares for my portfolio. But I don’t think I’ve left it too late to increase my stake.
At 685.4p today, the insurer still offers tantalising value for money. Analysts think annual earnings will soar 114% in 2025, resulting in a price-to-earnings growth (PEG) ratio of 0.1.
The ratio remains well below the bargain watermark of 1 over the medium term too. Projected growth of 16% and 12% in 2026 and 2027 leaves PEG multiples of 0.7 and 0.8.
What’s more, further expected dividend rises over the period create huge yields of 5.5% for this year, 5.9% for 2026 and 6.4% for 2027.
I believe Aviva may be one of the FTSE 100’s best shares for a blend of growth, dividends and value. I’ll be looking to increase my own holdings when I next have spare cash to invest.
