The Motley Fool

The Aviva share price is up 19% in 2021. Should I buy now?

Image source: Getty Images.

The Aviva (LSE: AV) share price is up over 19% since the start of 2021. And the stock has increased by almost 35% during the past 12 months. I don’t think that’s bad for an insurance business that’s operating in what’s supposed to be a boring sector.

But the cheap valuation is too hard for me to ignore. The stock trades on a price-to-earnings (P/E) ratio of 7 times and has a dividend yield of almost 7%. I’d buy the shares now. Here’s why.

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...

Core business

I think Aviva had lost its way. In my view, it was a case of little bit of this and a some of that. The business lacked focus. Well, that was before the new CEO, Amanda Blanc, came in last year.

She’s making progress where her predecessors had struggled. Her aim is to improve the growth and profitability of its core businesses. Under her leadership, Aviva has disposed of eight non-core assets. This will create £7.5bn in cash proceeds once the deals have been completed.

What’s more, she’s focused on reducing the overall debt position and delivering shareholders a good return. And so far it’s working. The company announced that it will be making a substantial capital return to shareholders. Details on this will be released by Aviva later on this year.

The general insurer is undergoing a transformation, which will take time. I’ll have to wait and see whether Blanc will be able to deliver the goods. But so far, I’m impressed by what she’s doing.

Dividend

I can’t mention the Aviva share price without going into some depth about the income. Just by holding the stock, I could receive a dividend yield of 7%. And as I said, the company has confirmed it will be distributing more capital to shareholders. I can’t complain about that.

Aviva isn’t the most exciting of businesses. It doesn’t have the growth of a tech stock. But what it does do is generate cash flow to pay out as income. I don’t expect stellar share price appreciation from this steady Eddy stock, but as long as it pays the dividend then most investors should be happy.

Broker views

I’m not the only one who’s bullish on the Aviva share price. Earlier this month, the investment bank, Citi, reiterated the company as its top pick within the European insurance sector.

It reckons that the successful deployment of excess capital over time could result in significant upside. I guess time will tell but its analysts have lots of conviction in the company.

Risks

Of course, the shares do come with risk. The dividend isn’t guaranteed and it’s still unclear how the surplus capital is going to be distributed. It could be a one-off payment or share buybacks.

But we even don’t know how much is going to be returned to shareholders yet. If this is a small amount, investors may be disappointed, which could impact the Aviva share price.

But I’m hopeful that the board have the stockholder’s best interests in mind. And the company is making good progress, hence I’d buy.

“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!

Nadia Yaqub has no position in any of the shares mentioned. Citigroup is an advertising partner of The Ascent, a Motley Fool company. 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

Renowned stock-picker Mark Rogers and his 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 click below to discover how you can take advantage of this.