When scouring the FTSE 100 for alternatives, Aviva (LSE: AV) shares by no means fail to leap out at me. However does the insurance coverage large supply probably the most compelling worth of all of the shares within the index?
Low cost inventory
Let’s begin with the value tag.
I can at the moment take a stake on this firm for the equal of 11 occasions FY24 earnings. That’s definitely cheaper than the long-term common for FTSE 100 shares.
Then again, it isn’t fairly so compelling in comparison with a few of Aviva’s sector friends. Shares in Prudential, for instance, commerce at a bit beneath 9 occasions FY24 earnings.
Then once more, it’s vital to look past a single quantity earlier than investing any cash.
Forward of expectations
Primarily based on current half-year outcomes, Aviva appears to be in good kind.
Earlier within the month, it revealed a better-than-expected 14% rise in working revenue. This got here in at £875m in comparison with £765m final 12 months due to an increase usually insurance coverage premiums in Britain and Eire. The market was anticipating round £830m.
All advised, the corporate had practically £400bn in belongings beneath administration on the finish of June. It additionally stated that it was assured of assembly its full-year targets.
Don’t neglect the dividends!
Its earnings credentials are price mentioning too.
Administration elected to boost the interim payout to 11.9p per share. That’s a 7% leap on the quantity handed again to shareholders final 12 months.
Analysts have the full dividend for 2024 at 35.4p per share. This equates to a dividend yield of seven% — double the yield of the FTSE 100 as a complete.
This not solely makes Aviva one of many largest payers within the index however an actual dividend champion throughout your entire UK inventory market.
Think about the dangers
So, we’ve bought a (pretty) low-cost inventory and a beautiful passive earnings stream. What might go mistaken?
Properly, that is investing. A bumpy experience ought to all the time be anticipated.
Aviva has and can proceed to function inside totally aggressive markets uncovered to the occasional catastrophic occasion. Maybe for this reason there was no fanfare when these aforementioned outcomes had been introduced. Or maybe it’s as a result of the inventory had been thrashing the FTSE 100 in 2024 and among the excellent news was already within the value.
It’s additionally price remembering that these dividends aren’t assured. Certainly, Aviva has a blended observe file on this entrance. Years of will increase have been cancelled out by sudden cuts, normally the results of a normal financial wobble. The latest instance was throughout the pandemic.
On a constructive observe, being such a cash-generative firm has meant these interruptions have been pretty transient.
A terrific possibility
Whether or not that is the perfect worth inventory within the FTSE 100 is open to debate and never helped by the truth that the index consists of radically totally different companies. It’s a bit unfair to check apples with oranges.
Bearing in mind all the above, nevertheless, I reckon there are loads worse choices for me than investing in Aviva shares right this moment if I had the spare money.
CEO Amanda Blanc has made a superb job of chopping prices and the sale of extra non-core belongings going ahead, mixed with that constructive earnings outlook, suggests there could possibly be extra share value rises forward.
