The Aviva (LSE: AV.) share price has put on a brilliant performance this year so far. In 2024, the stock is up 11.9%. That means in the last 12 months, Aviva has climbed 27.2%.
That means it’s outperformed the FTSE 100 across both timescales. While buying index trackers can offer a smart and simple way to build wealth over time, picking individual stocks can also prove to be incredibly beneficial.
But with the stock jumping this year, would it still make a shrewd addition to my portfolio? I’ve been keeping a very close eye on the insurance stalwart over the past couple of months. With its share price gaining momentum, I reckon now could be the time for me to strike. Let me explain why.
Value for money
Firstly, I think the Footsie constituent looks like good value for money. It currently trades on a price-to-earnings (P/E) ratio of 10.1. That’s below the FTSE 100 average of 11. For a company of Aviva’s quality, I think that’s a steal. Its forward P/E is 10.5. Again, I think that looks like great value.
Dividend yield
Then there’s its dividend yield, which currently stands at 7%. I’m an investor who targets stocks providing meaty passive income. Aviva’s payout is comfortably above the FTSE 100 average of 3.6%. In fact, it’s the fifth-highest yield on the index.
Dividends are never guaranteed. That said, I reckon we could see Aviva’s payout rise in the years to come. I say that because management seems keen to keep rewarding shareholders. Last year, the business upped its dividend by 8% to 33.4p per share. Its first-half results this year revealed that its interim dividend jumped 7% to 11.9p.
Looking ahead, its forward yield for the upcoming year is 7.1%. By 2026, some predict that could reach as high as 8.4%.
I’m also a fan of its share buyback programmes. The most recent announcement came in March, with it totalling £300m.
Streamlining
Aside from that, there are other reasons why I’m bullish on Aviva. I’ve been especially impressed with the turnaround the firm has made in the last couple of years. From a business that was critiqued for being inflated with too many operating divisions, Aviva is now making good headway with its streamlining process.
This has sped up since CEO Amanda Blanc took over. Under her leadership, Aviva has offloaded struggling divisions and placed greater focus on profitable regions. For the first half of the year, operating profit rose by 14% to £875m. That’s off the back of a strong 2023.
The risks
Of course, the moves it has made in recent years do come with risk. Focusing on just a few markets leaves the business reliant on a handful of regions. Should they experience a downturn, this could see the stock suffer.
Furthermore, the insurance industry is very competitive. There’s the ongoing rising threat from smaller competitors such as insurtechs.
I’d buy today
But at its current price, and with its thumping yield, I think Aviva would be a savvy buy for my portfolio. I’d happily buy the stock today if I had the cash.
The post 7% yield and a P/E of 10.1! Is the Aviva share price a steal? appeared first on The Motley Fool UK.
Pound coins for sale — 31 pence?
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
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Charlie Keough has no position in any of the shares mentioned. 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.
