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Aviva plc Could Help You Retire Early


As all Fools know, there tend to be two types of investor: growth and income.

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The former seek out above-average earnings per share (EPS) growth (hopefully over a sustained period), while the latter are looking for a relatively high yield and impressive dividend per share growth prospects.

Indeed, the focus for 2014 could be on growth stocks, with 2013 being a year of considerable rerating for many companies that were deemed to have the potential to post above-average bottom-line growth. This point could be reinforced by the likelihood of interest rates going up over the next few years.

In other words, with the UK and global economy picking up pace, interest rate rises on the horizon and a buoyant stock market that has favoured cyclical stocks, growth stocks could be a great place to be in 2014.

However, it still is possible to buy companies with above-average earnings prospects but which still offer a decent yield. A prime example is Aviva (LSE: AV) (NYSE: AV.US), which you may be surprised to hear is forecast to deliver EPS growth of 12% in 2014 and 8% in 2015 — considerably above the FTSE 100 average forecast of 4-7% per annum.

Aviva, though, does not solely offer encouraging growth prospects. It continues, as a major insurance company, to be relatively attractive for income-seeking investors, too.

Indeed, Aviva currently yields 3.2%, which is slightly below the FTSE 100 yield of 3.5% but remains ahead of the inflation rate. So, a real return from the income element of Aviva’s total return remains on offer.

In addition, the rate at which dividends per share are set to climb over the next two years should continue to make Aviva an attractive stock for income-seeking investors.

That’s because Aviva is forecast to grow dividends by 20% over the next two years, which works out as an annualised growth rate of over 9.5%. This is well ahead of inflation and, should Aviva’s share price be at the same level in two years as it is now, would mean that shares will yield just under 4%.

Combine this dividend per share growth with (considerably above-average) EPS growth forecasts over the next two years and it’s clear to see why Aviva could be a stock to help you retire early. 

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> Peter owns shares in Aviva.

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