This £11.5bn FTSE 100 firm has restarted its dividend. I’d buy its shares today!

When the coronavirus crisis is over and the world returns to normal, I think this FTSE 100 share will pay floods of cash to its owners.

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For 15 years from 1987 to 2002, I worked in the insurance industry in claims, legal and marketing positions. One private insurer I worked for was bought by a giant US corporation, triggering multi-million-pound payouts to directors. Similarly, FTSE 100 firms I worked for paid fat wages and bonuses to senior staff.

In short, I know all too well how highly profitable insurers are – and how life-changing working for them can be for top bosses!

Insurance is a lucrative business

As the world of insurance is based on sound statistical (actuarial) principles, insurers can be solid businesses to own shares in. Yesterday, I wrote about shares in Prudential. I see this FTSE 100 share as offering an attractive combination of income and growth.

Aviva is another great FTSE 100 firm

Aviva (LSE: AV) is another insurance share that I’d be happy to own. Like the Pru, it’s a big, beautiful FTSE 100 business with powerful brands and a bright (if unexciting) future

At today’s closing price of 292.2p, Aviva has a market value of £11.5bn – around a third of Pru’s size. However, Aviva shares may offer deeper value than Pru stock, because they have fallen by almost a quarter (23.7%) over 12 months.

Aviva shares suffered in the crash

On 12 November last year, Aviva shares were riding high, closing at 439.4p. Like the wider market, they crashed spectacularly during the March market meltdown. At their low, Aviva shares closed at 205.7p on 19 March – 86.5p below today’s price and a bargain of a lifetime, in my view.

In the spring, under pressure from its UK regulator and in order to preserve capital, Aviva suspended its dividend. However, the pandemic didn’t hit Aviva nearly as hard as first feared, so it has resumed this cash payout.

Another FTSE 100 dividend returns

The bad news for income-seeking investors is that Aviva has restored its dividend at a much lower level. The FTSE 100 firm had promised a total dividend for 2019 of 21.4p, but this was slashed to just 6p. This cash will be paid on 24 September to shareholders as at 13 August, so it’s not too late to grab it today.

The good news is that Aviva shares are still cheap, in my view. Although 2020 profitability and earnings will be hit by higher claims because of Covid-19, normal service should resume in 2021.

Right now, Aviva shares trade on a historic price-to-earnings ratio of 5.34, for a bumper earnings yield of 18.7%. I think that the much-reduced dividend yield of just 2% could easily triple or quadruple from here.

As an insurance business refocusing on the well-served markets of the UK, Ireland and Canada, Aviva is not an exciting share for day-traders. But its Solvency II ratio of 194% and excess capital demonstrate its financial strength. I see it as a solid, buy-and-hold FTSE 100 stalwart for value and income-seeking investors.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Cliffdarcy has no position in any of the shares mentioned. The Motley Fool UK has recommended Prudential. 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.

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