I reckon the FTSE 100’s largest insurance company, Aviva (LSE:AV), could be cracking value at current prices. While fears around the health of the UK economy have depressed the share price, I think this is overdone.

An 8.3% yield is on offer for income investors.

That’s more than twice the FTSE 100 average of 3.6%. So is now the time to consider loading up on the shares?

Income and growth

Aviva swung from a £1.9bn profit in 2021 to a £1.1bn loss in 2022. That’s been the source of much muttering in the ranks.

But City analysts are projecting a return to £1bn profit in the full-year 2023 results. And a whopping 59.7% growth in earnings per share next year. Aviva has told the market that it will continue raising dividends per share from today’s 31.8p to 34.6p by 2024.

I don’t think the share price has moved up enough to capture the reality of such a turnaround.

Aviva represents a value play, there’s little doubt of that. The shares have rebounded from a three-year low of £3.75, set in September. But I see potential for further rises here.

Undervalued

Aviva isn’t only the UK’s largest insurer. It’s also Britain’s largest life insurer, with a more than 20% market share.

It’s now priced at just over £4 a share. This gives the company a price to earnings ratio of 9.6. That’s well under the FTSE 100 average of 13. It’s also too cheap for a fundamentally sound business like this one, in my opinion.

The company reported in its latest quarterly results that its cash and capital position is “robust”. It also noted that it increased the interim dividend by 8%.

One risk to the Aviva share price comes from a macroeconomic perspective. In a slower economy, fewer businesses tend to prioritise insurance. That makes for a potentially shrinking pool of new customers.

Strong at the top

I always look at leadership first when evaluating any potential additions to my portfolio. By any measure, CEO Amanda Blanc has done an admirable job.

Since taking over from Maurice Tulloch in July 2020, the Aviva chief executive has dramatically streamlined the business. It now operates in eight fewer international markets than when she arrived.

At the same time, Blanc has moved to get ahead of Aviva’s rivals. Buying up competing firm AIG Life UK for £460m in September 2023 was a good way to do that. As the legendary CEO Jack Welch famously said, the way to get ahead is to “buy or bury the competition”.

Takeover bait?

In October 2023, Aviva shares jumped on reports that the business was attracting takeover interest. The Times said several multinationals were interested. These include Germany’s largest insurer Allianz and the £72bn Danish firm Tryg. While a buyout figure of £6 a share (50% above the current share price) was mooted, I’d normally not buy into a company just on takeover rumours alone. I could be waiting a very long time to see that buyout go through.

Still, of its FTSE 100 rivals, only Legal and General has a higher payout ratio. Aviva’s 8.3% yield is more than four times higher than rival Prudential.

With all that in mind, I think Aviva could be a brilliant bargain based on its profit outlook.

The post 8.3% yield! This FTSE 100 giant looks ridiculously good value appeared first on The Motley Fool UK.

More reading

• 3 of the best UK growth, value and dividend shares to consider in an ISA!
• How much do I need in an ISA to cover a £137 monthly energy bill for life?
• Here’s how I’m targeting £13,534 in yearly passive income from £20,000 in this FTSE financial star
• Here’s how long-term investors can benefit from a stock market crash
• Aviva’s share price has left rivals in the dust. Here’s why it’s still good value

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

The Aviva (LSE:AV.) share price has been on a great run since the stock market correction in March. The shares look good value for money as well as offering me a passive income opportunity. Should I buy the shares for my holdings? Let’s dig deeper to find out.

Aviva share price soars

As a quick reminder, Aviva is the largest insurance business in the UK. It has over 15m customers and a long track record, with roots stretching back over 300 years.

So what’s the current state of play with the Aviva share price? Well, as I write, the shares are trading for 430p. At this time last year, the stock was trading for 396p, which equates to an 8% return over a 12-month period. More recently, the shares have returned nearly 20% since March, when they dropped to 360p.

Risks to note

Aviva has been a passive income-seekers’ haven in recent times. This is one of the things that has drawn my attention to the stock as well as the recent Aviva share price resurgence. I am conscious, however, that dividends are never guaranteed. They can be cancelled at the discretion of the business at any time. In fact, Aviva cancelled its dividend when the pandemic struck, like many other stocks. Furthermore, subsequent dividends have been less than at pre-pandemic levels.

Next, Aviva has been in the process of streamlining operations and disposing of non-core businesses. It decided to undertake this exercise to push growth, and get rid of unprofitable businesses that have actually left it with debt. Debt is usually a red flag for me, even more so in times of economic uncertainty like now. Restructuring, paying down debt, and maintaining growth and consistent returns is no easy feat. I will keep an eye on developments on all fronts against the current economic volatility.

Why I like Aviva shares and would buy them

So to the bull case then. I like Aviva shares for a few key reasons. The first has to be the level of returns on offer and the fact it seems to be cash-rich and willing to return this cash to investors. At current levels, Aviva’s dividend yield stands just under 7%. This is higher than the FTSE 100 average of 3%-4%. It confirmed a £1bn share buyback scheme in March and intends to announce another when full-year results are due later in the year.

Next, despite the Aviva share price being on a great run in recent months, the shares still look good value for money. The FTSE 100 average price-to-earnings ratio sits close to 15. Aviva’s ratio is currently six.

Furthermore, Aviva has defensive traits, in my opinion. No matter the economic outlook and backdrop, car insurance is a must. Based on Aviva’s profile and presence, it should be able to leverage this position into performance growth and returns.

To summarise, I think Aviva is an excellent stock to add to my holdings for the passive income opportunity alone. As a bonus, it is a market leader in its respective sector, with growth plans and a willingness to return cash to investors. I would buy the shares today.

The post The Aviva share price is dirt-cheap and offers a 7% dividend yield! appeared first on The Motley Fool UK.

More reading

• 3 of the best UK growth, value and dividend shares to consider in an ISA!
• How much do I need in an ISA to cover a £137 monthly energy bill for life?
• Here’s how I’m targeting £13,534 in yearly passive income from £20,000 in this FTSE financial star
• Here’s how long-term investors can benefit from a stock market crash
• Aviva’s share price has left rivals in the dust. Here’s why it’s still good value

Jabran Khan 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.

Director dealings are essentially insider transactions for shares between directors and the companies they work for. These dealings are always made public, and are often considered a good indicator of a company’s future prospects. However, they don’t get nearly as much attention as other company news due to their complex nature. Nonetheless, here I’m breaking down this week’s biggest director dealings from three FTSE firms.

Aviva

Aviva (LSE: AV) is a British multinational insurance company. It has millions of customers across its core markets. Aviva is also the UK’s largest general insurer. This week, an influential director purchased shares through the firm’s Global Matching Share Plan.

• Name: Jason Storah
• Position of director: Chief Executive Director
• Nature of transaction: Partnership shares and matching shares
• Date of transaction: 15 July 2022
• Amount bought: 38.413602 @ £3.93
• Amount received: 76.827204 @ £3.93
• Total value: £452.70

Royal Mail

Royal Mail (LSE: RMG) is Britain’s biggest postal service and courier company. The group runs the brands Royal Mail and GLS. It released its Q1 trading update this week. Two director dealings also occurred.

• Name: Mick Jeavons
• Position of director: Chief Financial Officer
• Nature of transaction: Free shares (Deferred Share Bonus Plan 2019)
• Date of transaction: 18 July 2022
• Amount bought: 14,132 @ nil
• Total value: £N/A

• Name: Katherine Amsden
• Position of director: PCA of Mark Amsden, Group General Counsel and Company Secretary
• Nature of transaction: Purchase of shares
• Date of transaction: 21 July 2022
• Amount bought: 34,262 @ £2.92
• Total value: £99,977.21

Deliveroo

Deliveroo (LSE: ROO) is a British online food delivery company. It operates in over 200 locations across the UK and internationally. In the UK, it is the second-biggest food delivery platform. In this week’s transaction, a director exercised their option to redeem stock compensation.

• Name: Adam Miller
• Position of director: Chief Financial Officer
• Nature of transaction: Free shares
• Date of transaction: 15 July 2022
• Amount received: 83,400 @ £0.85
• Total value: £70,973.40

• Name: Adam Miller
• Position of director: Chief Financial Officer
• Nature of transaction: Sales of shares to cover tax liabilities
• Date of transaction: 15 July 2022
• Amount sold: 40,407 @ £0.85
• Total value: £34,345.95

Types of shares in a SIP

To provide context, there are a few types of shares within a company’s share incentive plan (SIP). A SIP is an employee plan for companies within the UK to flexibly award equity to employees. Publicly listed companies normally exercise this option because it’s tax-efficient for both the employer and its employees.

In this week’s director dealings, Aviva’s CEO opted to purchase partnership shares. Partnership shares give employees the opportunity to buy shares via deductions from their salary, before tax deductions. But where partnership shares are offered, the company can also offer matching shares. This can range up to a maximum ratio of two free matching shares per partnership share purchased, as was the case. That being said, it’s important to note that matching shares must normally be held in a trust for at least three years, and held for five years in order to receive full tax relief. However, these shares may be forfeited if an employee withdraws their partnership shares from the trust.

On the other hand, the Royal Mail CFO received free shares. This occurred under the company’s Deferred Share Bonus Plan from 2019. Having said that, the director is expected to retain their share-based awards until they achieve an equivalent of 200% of their salary.

As for Deliveroo’s CFO, he received free shares. These are a form of restrictive stock units (RSU). RSUs are a form of stock compensation. It is a promise from the company to award a company’s shares in the future. RSUs are most often used in younger companies. This is because cash on its balance sheet is used to grow the business instead.

The post Director dealings: Aviva, Royal Mail, Deliveroo appeared first on The Motley Fool UK.

More reading

• 3 of the best UK growth, value and dividend shares to consider in an ISA!
• How much do I need in an ISA to cover a £137 monthly energy bill for life?
• Here’s how I’m targeting £13,534 in yearly passive income from £20,000 in this FTSE financial star
• Here’s how long-term investors can benefit from a stock market crash
• Aviva’s share price has left rivals in the dust. Here’s why it’s still good value

John Choong has no position in any of the shares mentioned. The Motley Fool UK has recommended Deliveroo Holdings Plc. 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.

Aviva (LSE:AV) has been a major player in the insurance, pension and personal wealth industries in the UK for a number of years. It has become one of the most trusted and recognised UK brands. Investors, however, have not always looked at the company in the same way. In fact, the Aviva share price is down 18% in the last five years. 

Investors have historically seen Aviva as a group with too many business sectors and not enough focus on the part of the senior management team. They may be right, as profit margins and growth have been weak. However, does a now-reconstructed business model make this FTSE 100 share a must-buy for me?

Hope ahead for the FTSE 100 giant?

Aviva has taken note of investor concerns and spent the last year slimming down its ventures and establishing a unified business focus. Throughout 2021, it grew its cash remittances by 22% and sold eight non-core businesses. 

The firm’s selling spree was built around offloading European and Asian ventures to aid a shift towards a UK, Irish and Canadian focus. The sales were estimated to raise £7.5bn that would fund debt repayments and boost returns to shareholders in the long run. 

But it hasn’t all been about sell-offs as it has also made acquisitions.” Through its 2018 acquisition of Wealthify, Aviva has aimed to work with customers through the whole of their financial journey. They can build wealth through Wealthify and other investment services, purchase insurance and retire with pension solutions. And as it’s estimated that one in four people in the UK will be over 65 by 2039, the firm could possibly expect good growth in its pension services division. 

Concerns to still consider

Aviva’s senior management has been upbeat about future prospects. But recent results have shown that challenges remain.

The insurer reported a 10% fall in operating profit in 2021. Profit margins also fell from 5% to 1.5% and there was a very poor return-on-equity of 1.7%. All this came despite the trimming down of some business operations.

Yet I’m optimistic about its future. The company’s positive refocus of business activities and promise of high shareholder returns may come along with profitability concerns. But I believe that the Aviva share price could be good value as a possible long-term addition to my portfolio.

I believe that offloading non-core businesses was a positive move. The company can now concentrate expertise and capital on key markets and cut down on business costs. The 5% dividend yield on its own is nearly enough to convince me to buy the shares.

While the company still comes with a number of risks, I’m confident that Aviva has positioned itself well for the future and I’m considering opening a long-term position.

The post Does the Aviva share price make it one of the best FTSE 100 shares to buy? appeared first on The Motley Fool UK.

More reading

• 3 of the best UK growth, value and dividend shares to consider in an ISA!
• How much do I need in an ISA to cover a £137 monthly energy bill for life?
• Here’s how I’m targeting £13,534 in yearly passive income from £20,000 in this FTSE financial star
• Here’s how long-term investors can benefit from a stock market crash
• Aviva’s share price has left rivals in the dust. Here’s why it’s still good value

Finlay Blair 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.

Dividend stocks

In times of turmoil, I often look to boost my passive income, especially as lower share prices often equate to higher yields. Of course, this is provided that the company does not cut its dividend. But to protect myself against this eventuality, I always make sure that any dividend stocks I invest in have large dividend cover.

Legal & General (LSE: LGEN) is an excellent example of a FTSE 100 stock that I’m buying right now. Indeed, the insurance company has seen consistent dividend growth, and has recently raised its full-year dividend by 5%, to a figure of 18.45p per share. At its current share price, this equates to a yield of 7%. This is one of the highest out of all FTSE 100 stocks. Further, the company is currently retaining 50% of its earnings to fuel further growth. This ensures that the dividend is sustainable, and there is also a focus on boosting profits.

With a price-to-earnings ratio of around seven, I also feel that the company is far too cheap. This is especially true as the company continues to see profit growth. As such, despite the risks of a stock market crash, which would have a disproportionately large impact on L&G shares due to its large asset management sector, I’m still buying.  

Another FTSE 100 stock with large dividends

Aviva is another insurance company I’m buying. In fact, due to several divestments last year, it expects to return around £4.75bn. This includes a large £1bn share buyback programme and a 40% increase in the dividend this year to around 31.5p per share. This equates to a yield of around 7.5%. Such a high yield indicates that Aviva shares may be too cheap, especially as there is no doubt that it’s currently sustainable. As such, even though a suffering economy would cause great turmoil for Aviva, this is another dirt-cheap FTSE 100 stock I’ll continue to add to my portfolio. 

Buy quality stocks

The recent dip in the FTSE 1oo also offers a great time to buy quality stocks, which have previously been expensive. Diageo (LSE: DGE) is a good example. The drinks giant, with a giant portfolio of 200+ brands, has always outperformed the FTSE 100, yet year-to-date, it’s fallen around 16%. This is partly because the Smirnoff vodka maker has paused exports to both Ukraine and Russia, which will inevitably have an impact on revenues.

It may not be ‘dirt-cheap’ now, but it is cheap and its quality is not in doubt. In the recent half-year results, it announced a 24.7% year-on-year profit rise to £2.7bn. As it continues to expand its portfolio, and grow sales in developing regions, I’m confident it can continue to see steady growth over the next few years. With a historically low price-to-earnings ratio of around 20, I also feel it’s too cheap. This is another stock I’ll continue to add to my portfolio.  

The post I’m buying dirt-cheap FTSE 100 stocks and holding them for the long term appeared first on The Motley Fool UK.

More reading

• How these 2 dividend shares could help an ISA investor target a £1,639 income in 2026
• How many Legal & General shares does it take to match the State Pension’s £12,547 income?
• How scared should investors be about a stock market crash? I say, not at all
• 3 of the best UK growth, value and dividend shares to consider in an ISA!
• AJ Bell investors are snapping up these FTSE shares. Should others join them?

Stuart Blair owns shares in Aviva, Diageo and Legal & General. The Motley Fool UK has recommended Diageo. 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.

A diversified miner

Due to the rising price of commodities, Anglo American (LSE: AAL) had an excellent 2021. Indeed, in the first half of the year, revenues rose 114% year-on-year to $2.8bn. Underlying EBITDA was also able to increase 262% to reach over $12.1bn. This was only possible due to the extremely high price of the commodities that Anglo sells. For example, in the first half, its average iron ore price rose from $90 to $210 per tonne; the price of copper rose from $2.50 to $4.60 per pound; and rhodium rose from $9,254 to $24,662 per ounce. 

These large profits have resulted in very large dividend payments, a reason why Anglo is one of my favourite dividend stocks. Indeed, last year, the group paid an interim dividend of $1.71 per share and a special dividend of $0.80 per share. For the next 12 months, it has a prospective yield of around 6%, far higher than other FTSE 100 stocks. The policy of paying out 40% of profits also seems very sustainable.

Nonetheless, while I would buy due to this dividend, there is the risk that profits will decrease. This is because the high price of commodities may not be sustainable. For instance, the price or iron ore has already fallen to $116 per tonne due to plummeting Chinese demand. This is Anglo’s most profitable segment, so it may lead to declining profits, and a smaller dividend next year. But it has a very diversified portfolio, and this helps it stand out from other mining stocks. This is what tempts me to buy for my portfolio.

An insurance dividend stock

Aviva (LSE: AV) is the other dividend stock I think could perform well in 2022. Indeed, after selling several non-core divisions over the past year in an attempt to focus its business on both the UK and Canada, the insurance company has a ton of cash. This means that at least £4bn is expected to be returned to shareholders. This is likely to include a special dividend, which will be announced at the full-year results in March. Even without this special dividend, which has not actually been confirmed, Aviva shares still yield nearly 6%.

The dividend also looks very sustainable. Indeed, at the company’s half-year results, it reported that debt had been reduced by £1.9bn. Following this debt reduction, more excess cash can be returned to shareholders. This cements Aviva as one of my current favourite dividend stocks, being both high-yielding and sustainable.

There is, unfortunately, the risk that the UK’s economic recovery takes a downturn due to Omicron. Indeed, Aviva is fairly reliant on a strong economy. But due to the many strengths of the company, I remain confident and may add more of the shares to my portfolio. 

The post 2 high-yielding FTSE 100 dividend stocks to buy in 2022 appeared first on The Motley Fool UK.

More reading

• 3 of the best UK growth, value and dividend shares to consider in an ISA!
• How much do I need in an ISA to cover a £137 monthly energy bill for life?
• Here’s how I’m targeting £13,534 in yearly passive income from £20,000 in this FTSE financial star
• Here’s how long-term investors can benefit from a stock market crash
• Aviva’s share price has left rivals in the dust. Here’s why it’s still good value

Stuart Blair owns shares in Aviva. 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.

Since it crashed 3% in a day due to Omicron fears, the FTSE 100 has remained volatile, but it is currently over 11% higher than this time last year. But the performance of the index as a whole masks very different performances of individual stocks. I still believe that some FTSE 100 stocks offer significant value, while others seem overpriced. Here’s one I think will perform excellently in 2022, and another that I think could be set to decline.

An insurance giant

After years of underperformance, Aviva (LSE: AV) seems to have been reinvigorated over the past year, under the management of Amanda Blanc. This has resulted in the Aviva share price climbing 24% over the past year, outperforming other FTSE 100 stocks.

I’m also optimistic for 2022. In fact, after it sold several non-core divisions, including its Polish, Italian, and Vietnamese operations, the company has a ton of excess cash. It has pledged to return at least £4bn to shareholders, through both dividends and a share buyback programme. Recently, it also increased its ordinary buyback programme from £750m to £1bn. This seems like a sign of things to come, as further capital return and dividend plans are expected after the full-year results in March 2022. This is likely to include a special dividend.

After selling its non-core units, Aviva seems to have focused on its core businesses in both the UK and Canada. So far, this is proving successful, especially as in the first half of the year, adjusted operating profits from continuing operations rose 17% to £725m. It is also on track to achieve £300m of cost savings by 2022.

The main risk is that the UK economy, to which Aviva is strongly connected, starts to decline. This is especially worrying due to the rise of Omicron. But despite this risk, Aviva’s business seems strong, and I think 2022 could be a very good year. I may buy more Aviva shares before then.

An overpriced FTSE 100 stock

Rentokil (LSE: RTO) has established itself as the global leader of pest control. This has partly been due to the company’s strategy of acquisitions, as it has made 228 since 2016. Recently, it has continued this strategy, announcing an acquisition of its American rival, Terminix, for $6.7bn. But while another acquisition may be a sign of optimism, shareholders seem more worried, with the FTSE 100 stock falling over 12% on the day it was announced (although they are up almost 11% year-on-year as I write). I also have my worries about this acquisition. For one, the company is paying a 47% premium for it, which seems very expensive. Secondly, it may attract the attention of antitrust regulators in the US, which could cause further difficulties. I also worry that it demonstrates the firm’s lack of organic growth. Instead, it seems to have become reliant on acquisitions.

There are some reasons to buy Rentokil, however. For one, this acquisition is expected to lead to around £113m in cost savings three years after the deal has been completed. Further, Rentokil has experienced strong growth recently, and in Q3, excluding its disinfectant services, revenue grew 14%. But with a price-to-earnings ratio of around 40, this growth is not enough for me to buy. Therefore, this is a FTSE 100 stock I’m avoiding in 2022.

The post A no-brainer FTSE 100 stock to buy and 1 to avoid in 2022 appeared first on The Motley Fool UK.

More reading

• 3 of the best UK growth, value and dividend shares to consider in an ISA!
• How much do I need in an ISA to cover a £137 monthly energy bill for life?
• Here’s how I’m targeting £13,534 in yearly passive income from £20,000 in this FTSE financial star
• Here’s how long-term investors can benefit from a stock market crash
• Aviva’s share price has left rivals in the dust. Here’s why it’s still good value

Stuart Blair owns shares in Rentokil. 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.