Stock market

Here’s why Aviva’s share price suddenly plunged.

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Last year was a good one for global investors. gave S&P 500 The index has jumped 25.6 percent in the past 12 months, beaten by tech-heavy rivals, Nasdaq Composite (+35.6%). And even though FTSE 100 It has increased by only 1.9 percent during this period. Aviva (LSE: AV) share price has outperformed its parent index.

Aviva shared the slide.

On Sunday, April 7, I wrote an article wondering if/when Aviva shares could clear the £6 mark. But then the share price fell on Thursday, April 11, perhaps to the surprise of some shareholders.

Then, as described in Douglas Adams’ brilliant 1979 sci-fi novel. The Hitchhiker’s Guide to the Galaxy: Don’t panic!

Ex-dividend Thursday

For historical reasons, many London-listed shares go ‘ex-dividend’ on Thursdays. If I buy the stock on its ex-dividend day, I am not entitled to the next cash dividend. Instead, this cash payment goes to the seller and I lose.

When shares go ex-dividend and miss that payout, their prices typically fall to reflect the loss of that passive income. That duly happened for Aviva, whose stock went ex-dividend last Thursday to pay out 22.3pa a share.

On Wednesday, April 10, Aviva’s share price closed at 489.9p. On Thursday, it closed down 31.1p at 458.8p. This 6.3% decline reflects the weakness of intra-day value additions in addition to the dividend loss.

Glad to be on board Aviva.

On Friday, Aviva’s share price closed at 460.2p, valuing the insurance and asset management group at £12.5bn. Here’s how the stock has performed over six periods:

Five days -6.1%
one month -3.5%
Six months 12.2%
YTD 2024 5.9%
a year 8.3%
Five years 7.9%

Despite their latest fall, Aviva shares have risen more than 12% over the past half-year. They have also posted single-digit increases in one year and five years. However, these figures exclude profits.

The latest dividend — 22.3pa a share — will be paid to shareholders on May 23. That’s 4.8% of Aviva’s current share price – a nice return for patient income investors, including me.

My wife and I paid 397p a share for our holding at the end of July 2022, which we bought for its market-driven income stream.

From 2021 to 2023, Aviva’s total dividend per share increased from 22.05p to 33.4p, a massive increase of 51.5% over two years. After its latest price drop, Aviva stock offers a market-beating return of around 7.3% a year. That’s nearly double Footsy’s annual cash yield of 4%. good

Never an easy ride.

To date, we have received a 42.1pa a share in Aviva dividend, which will receive 22.3p next month. That’s a total of 64.4p, or about a sixth (16.2%) of our initial investment.

That said, income/value investing is not a sure path to wealth, as future returns are not guaranteed. As such, they may be cut or canceled without notice. But CEO Amanda Blanc is making good progress on the sale of Aviva’s non-core businesses and other restructuring.

Finally, insurance is a risk game, with insurers losing out to the severe winter of 2022-23. Similarly, their share prices fell during the Covid-19 crisis in 2020. Nevertheless, we are involved in Aviva as long-term shareholders/owners!

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