Stock market

If I had invested £5,000 in Aviva shares 1 year ago, I would now have

I didn’t buy any. Aviva (LSE: AV.) had shares a year ago, but I bought some back in November. From both points in time, they have performed well.

But how exactly? What if I bought five grand of it? FTSE 100 Insurance stocks a year ago?

A strong performer

A year ago, Aviva shares were worth 419p. Today (April 10), it opened at 491p, up 17%.

That’s a much better 12-month return than the FTSE 100’s 1.9% return (discounting dividends, which the FTSE takes out generously).

Specifically, this means that my hypothetical £5,000 would now be worth around £5,850 on paper. An established, stable EddyFootsy is not worse than a dividend stock.

On top of that, I would have received a further £132 in dividends, bringing my total return to just under £6,000. And I have to pay another £266 dividend on May 23rd.

Oddly, when I bought them in November the shares were also 419p. I invested for two main reasons.

Ability to change

At first, I thought there could be a reasonable change in share price over the next couple of years. Not on the scale of Rolls RoyceOf course, but I thought the stock had a very good chance of moving to 500p and beyond.

Looking at the stock’s long-term performance, what does this give me?

Well, recent earnings reports have highlighted strong organic growth in Aviva’s capital-light businesses. These generally require less upfront investment and have the potential for better profit margins in the long run.

Additionally, the insurer recently completed a £453m acquisition. AIG Life Limited’s UK protection business. Chief executive Amanda Blank said the deal “Strengthens our prospects in the highly attractive UK securities market and continues our progress in repositioning the Group towards capital light growth.

Now, Aviva’s double-down strategy in mature markets such as the UK and Ireland is under threat. Important is a development. Where will it come from in the long term?

This is no longer a concern as financial performance is being improved by cutting costs and streamlining operations. But it can be long-term. We will have to wait and see.

Passive income

Another reason I invest is because of the generous returns on offer.

Fiscal year Dividend per share Dividend yield
2025 (prediction) 38.0p 7.7%
2024 (prediction) 34.7 p 7.0%
2023 33.4 p 6.7%

The 7% forward yield is well above the FTSE 100 average of 3.9%, and beats any of the best buy savings accounts I’ve been offered yet.

On paper, the dividend cover looks a bit thin at 1.3 times earnings, and no payout is set in stone.

However, when Aviva recently set a target of £2bn in operating profit by 2026, it said:The upgraded targets set today support our sustainable dividend policy. We now expect the cash cost of the dividend to grow by mid-single digits, which reflects our confidence and appetite for Aviva.

It further demonstrated this confidence with a new £300m share buyback programme.

All this sounds positive to me. I may pick up a few more shares in the coming weeks.

Source link

Related Articles

Leave a Reply

Your email address will not be published. Required fields are marked *

Back to top button