The Motley Fool

Want to buy dirt cheap FTSE 100 stocks? I’d check out the Aviva share price

Image source: Getty Images

The Aviva (LSE:AV) share price has taken a hammering during the coronavirus crisis. It is down more than 40% this year, which you might expect. Worryingly, it failed to participate in the FTSE 100 rebound in March and April. This tells me investors are suspicious about its prospects.

Aviva slipped today after its operating update showing an estimated £160m of additional general insurance claims stemming from the pandemic. Yet I still think this FTSE 100 dividend hero is in better shape than recent performance would suggest.

5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!

According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…

And if you click here we’ll show you something that could be key to unlocking 5G’s full potential...

I should have said fallen dividend hero back there. Last month, Aviva cancelled its final 2019 payment. This follows requests for dividend restraint from regulators, although not everybody listened. Rival insurer Legal & General Group is still paying its dividend.

Aviva share price crash

There are benefits to cancelling the dividend. This has bolstered the firm’s Solvency II cover ratio, estimated at 182% at the end of March. Today, management said it has the capital strength and liquidity to get through the crisis.

Aviva reported a 28% rise in new life insurance business to 31 March, with new UK Life business sales up 162% to £2.9bn. Bulk purchase annuities were particularly strong. General insurance sales rose 3%, helped by a recovery in Canadian premiums. The Aviva share price has solid foundations.

The group’s investment operation has done fairly well, although it warns numbers could be hit by “changes in investment performance, capital generation, and remittances”.

There was no way the Aviva share price was going to escape unscathed from the crisis. However, I think markets are taking an overly dour approach to its prospects. Yes, management has suspended the dividend, but when the pandemic recedes, it will be back.

Capitalisation looks healthy, so the group’s future is in little doubt. Obviously, a long recession and slow recovery will hit its investment arm in particular, and knock insurance sales too. That’s how it is with every company, right now. There are risks to investing today, but also potential rewards.

Dirt cheap FTSE 100 stock 

Lately, investors have prized Aviva for its dividend, which is sorely missed. Management will be keen to restore shareholder payouts to reward loyal investors as soon as it can.

If you buy today you will not get any income to tide you over until the stock picks up, which is a blow. However, its dirt cheap valuation reflects this, with the Aviva share price trading at 3.75 times earnings, one of the lowest on the FTSE 100.

All valuations have to be taken with a pinch of salt right now, obviously. Yet this does suggest its problems have been priced in. If buying stocks for the long term, as you should be, Aviva’s dirt cheap valuation makes it a tempting buy. Just give it time to recover.

“This Stock Could Be Like Buying Amazon in 1997”

I'm sure you'll agree that's quite the statement from Motley Fool Co-Founder Tom Gardner.

But since our US analyst team first recommended shares in this unique tech stock back in 2016, the value has soared.

What's more, we firmly believe there's still plenty of upside in its future. In fact, even throughout the current coronavirus crisis, its performance has been beating Wall St expectations.

And right now, we're giving you a chance to discover exactly what has got our analysts all fired up about this niche industry phenomenon, in our FREE special report, A Top US Share From The Motley Fool.

Click here to claim your copy now — and we’ll tell you the name of this Top US Share… free of charge!

Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Our 6 'Best Buys Now' Shares

The renowned analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply enter your email address below to discover how you can take advantage of this.

I would like to receive emails from you about product information and offers from The Fool and its business partners. Each of these emails will provide a link to unsubscribe from future emails. More information about how The Fool collects, stores, and handles personal data is available in its Privacy Statement.