The City’s Latest Forecasts For Aviva plc

It’s always worth keeping an eye on the earnings forecasts for your favourite companies, especially if you use forward P/E ratios to gauge when to buy and sell your shares.

You never know, if City brokers have been revising their projections of late, your investments may not be as cheap — or expensive — as you think!

Today I’m looking at the earnings and dividend forecasts for Aviva (LSE: AV) (NYSE: AV.US), the FTSE 100 insurer.


The consensus for 2013 is for underlying earnings per share of 42.2p, which puts the 384p shares on an undemanding forward P/E of 9.

However, the estimates suggest earnings may rally to 46.6p per share for 2014, reducing the forward P/E for next year to just over 8.

It’s worth pointing out that earnings per share measure are less useful for complex insurance companies like Aviva than they are for more traditional companies. Factors like stock market movements, that are outside of the company’s control, can impact upon profits and make its earnings look rather lumpy from one year to the next.

That said, one of the things I like about the forecast pages on the Fool website is that they show you how the earnings estimates have moved over the past year. So we can see that the earnings estimate for Aviva for 2013 was 54.1p a year ago and was reduced twice since then, although it’s been at much the same level for the last 3 months.

Obviously, as an investor, you would rather see your companies under promise and over deliver, so a rising trend in analyst forecasts is much more preferable. (By the way, if the forecasts remain the same over the course of a whole year, your analysts have probably fallen asleep on the job. Get new analysts.)


Not surprisingly, the dividend per share forecast for 2013 for Aviva shows a similar picture of decline over the last twelve months.

Aviva paid a dividend of around 26p for 2011 and then told investors it was “rebasing” its payout in March of this year. A total of 19p was paid for 2012, and just 15.5p is forecast for 2013, followed by an increase to 16.5p for 2014. Nevertheless, this still gives Aviva a forward dividend yield of around 4%. That’s above the market average although it is a little way below most other insurance companies right now.

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> Stuart does not own any share mentioned in this article.