Aviva‘s (LSE:AV.) a FTSE 100 share I opened a position in almost a year ago. I’ve topped up my holdings since then. And I plan to increase my stake again when I next have cash to invest.
I believe the financial services giant looks highly attractive in terms of growth and dividends. And its shares also look dirt cheap across a variety of measures too.
Here’s why I think the company’s a top blue-chip to consider right now.
Growth
Earnings growth’s been patchy at Aviva in recent years. Its bottom line dropped during the Covid-19 crisis, and then again in 2022 due to rising interest rates.
But the company moved back into growth in 2023. And City analysts expect profits to keep rising over the next three years at least, and by healthy double-digit percentages:
Year
Earnings per share
Earnings growth
2024
43.98p
17%
2025
50.87p
16%
2026
55.83p
10%
These bright forecasts reflect analyst expectations of falling interest rates and improving economic conditions. Combined, these could stimulate consumer spending and boost the performance of Aviva’s asset management division.
Profits will also benefit from ongoing demographic changes in its European and North American markets. More older people means higher demand for retirement, protection and wealth products.
Dividends
Like earnings, Aviva’s dividend record has been up and down since 2019.
However, with earnings tipped to shoot higher — and the company’s balance sheet significantly strengthened under current CEO Amanda Blanc — shareholder payouts, which have risen steadily since the end of the pandemic, are tipped to follow suit:
Year
Dividend per share
Dividend growth
2024
35.43p
6%
2025
38.13p
8%
2026
40.88p
7%
Dividends are never guaranteed. But Aviva’s cash-rich balance sheet puts it in great shape to meet these forecasts.
Its Solvency II shareholder coverage ratio was 205% as of June, more than twice the level that regulators require.
Value
Based on current earnings forecasts, Aviva shares trade on price-to-earnings growth (PEG) ratios of 0.6 for 2024 and 2025, and 0.9 for 2026. Any reading below 1 indicates that a share is undervalued.
The Footsie company also offers excellent value based on expected earnings. Dividend yields are a huge 7.4% for this year, 8% for 2025 and 8.6% for 2026.
By comparison, the average dividend yield for FTSE 100 shares sits way back at 3.7%.
A top buy
As with any UK share, Aviva exposes its investors to a degree of risk. Profits and dividends could disappoint if, for example, interest rates fail to decline steadily, dampening product sales. It also faces intense competition from the likes of Legal & General, Zurich and AXA.
But on balance, I believe the potential benefits of owning Aviva shares outweigh these risks. And its low valuation provides a cushion in case newsflow worsens which, in turn, could limit any share price reversals.
On balance, I think Aviva’s one of the best ‘all-rounders’ on the FTSE 100 today.
The post A FTSE 100 share that offers growth, dividends AND value! appeared first on The Motley Fool UK.
Like buying £1 for 31p
This seems ridiculous, but we almost never see shares looking this cheap. Yet this Share Advisor pick has a price/book ratio of 0.31. In plain English, this means that investors effectively get in on a business that holds £1 of assets for every 31p they invest!
Of course, this is the stock market where money is always at risk — these valuations can change and there are no guarantees. But some risks are a LOT more interesting than others, and at The Motley Fool we believe this company is amongst them.
What’s more, it currently boasts a stellar dividend yield of around 10%, and right now it’s possible for investors to jump aboard at near-historic lows. Want to get the name for yourself?
See the full investment case
More reading
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Here’s how I’d aim to earn £9,913 a year in dividend income from a £20k Stocks and Shares ISA
Why I think the FTSE 100’s the best place for my money right now
Royston Wild has positions in Aviva Plc and Legal & General Group Plc. 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.
