One of many issues I like about proudly owning shares in blue-chip dividend shares is the passive revenue streams they will probably provide. Take insurer Aviva (LSE: AV) for instance. The Aviva dividend yield is already 7.2%, which means that for each £1,000 invested immediately a shareholder would hopefully obtain £72 in dividends yearly in future.
The truth is, given its current observe document of rising the payout per share every year, the revenue prospects could also be even higher than that. No dividend is ever assured (and certainly, Aviva decreased its payout in 2020) however I see this as a inventory buyers ought to think about.
Stable dividend prospects
For starters, I like the truth that the corporate has proved it is ready to generate sizeable quantities of extra money. That’s useful as a result of it may be used to fund shareholder payouts within the type of dividends.
Demand for insurance coverage is prone to keep excessive. There will not be a lot progress in demand as Aviva operates in mature markets just like the UK and Canada. However there may nonetheless be progress in revenues by means of pricing will increase.
On high of that, Aviva could search to extend its market share by buying rivals — a subject that has been within the information this week. Additionally it is making efforts to promote current policyholders different merchandise (tens of millions of its UK shoppers already maintain a number of insurance policies with the agency).
That can hopefully help sturdy money era. That might underpin ongoing dividend progress every year, which administration has indicated is its plan. With a 7.2% yield, round twice the FTSE 100 common, I see the Aviva dividend as probably profitable.
Lengthy-term share value progress potential
On high of that, I reckon that Aviva shares may become a cut price not simply due to the revenue potential, but additionally when it comes to how the share value seems to be immediately in comparison with what it’d attain over the long run.
With a price-to-earnings ratio in single digits (simply), the inventory seems to be like a attainable cut price to me. The whole market capitalisation is round £12.6bn. But Aviva has confirmed critical money era potential over the course of a few years.
It has a robust model, giant buyer base and below present administration has centered extra sharply on a smaller variety of core markets. I see that pretty much as good for its long-term revenue potential.
A share to contemplate
In fact, Aviva has seemed promising up to now solely to disappoint. That 2020 dividend minimize put the funds on a greater footing, however was painful for current shareholders.
UK insurance coverage is aggressive (not that that is apparent from present premium ranges) and I see a danger of a price-focused rival in coming years attempting to undercut the large boys like Aviva. Given its reliance on the UK market that would damage revenues and earnings.
Nonetheless, priced attractively and with a excessive dividend yield, I feel it’s a share buyers ought to think about.
