Aviva plc’s Recent Results Make Me Even More Bullish

I always find myself interested in companies whose share prices move significantly on results day.

Sometimes it means there is a bargain to be had, other times it means that the company is performing better than the market expected.

In the case of Aviva (LSE: AV) (NYSE: AV.US), shares moved up by over 7% on the day of its recent interims and I was keen to find out why.

It turns out that the company is in far better shape than it was a year ago. It has been able to grow pre-tax profits by 5% to over £1bn and is driving through an ambitious cost-cutting programme, which seems to be on track.

Furthermore, the company still has a lot of potential and improvements to come, with the CEO admitting that the results were only “satisfactory”. This is good news for investors, as it shows that Aviva is not yet anywhere near the end of a journey of self-improvement and increased profitability.

Of course, the yield is not as impressive as it once was. It is currently 4.8% but, with dividends per share expected to fall in the next two years, a more realistic yield is 3.7%. However, the benefit of lower dividends per share is that more capital can be allocated to improving the business and making future dividend payments more affordable.

Indeed, I would rather have less of a sustainable dividend than more of an unsustainable one.

Clearly, there is some way to go in its journey but they key point from the results is that it is heading in the right direction and is making sound progress.

With shares offering good value at current levels, Aviva remains a ‘buy’ for me. Moreover, there are not too many companies that offer a price-to-earnings (P/E) ratio of 10.2 when the FTSE 100’s P/E is 15.2. Allied to this is an above-average prospective yield of 3.7% and annualised earnings per share growth of 10% forecast over the next two years.

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> Peter owns shares in Aviva.