The case for buying this dividend monster just got stronger! – Motley Fool UK

This dividend monster just posted impressive earnings figures that sent its share price skyrocketing. So is now the time to buy Aviva stock?
Image source: Getty Images
Dividend monster Aviva (LSE:AV) impressed investors on Wednesday with the release of its H1 data. The insurer was up early 9% by 9am. The stock has been a recent favourite of mine, and offers a whopping 6.5% dividend yield, even after this morning’s jump.
So let’s take a closer look at Aviva’s earning report and why I’m backing this stock for the long run.
On Wednesday, insurance firm Aviva said it had witnessed “continuing momentum” in the six months to 30 June. The firm reported growth in both operating profits and own funds generation during the first half.
There was a 14% increase in interim operating profits to £829m. Meanwhile, Solvency II operating own funds generation surged 46% to £538m. General insurance gross written premiums rose 6% to £4.69bn, with a “strong” 94% combined operating ratio. Life sales in the UK and Ireland were up 4% at £16.8bn.
The firm declared an interim dividend of 10.3p, broadly in line with its full-year dividend guidance of around 31p.
However, IFRS losses grew to £633m from £198m, largely reflecting adverse market movements.
Chief executive Amanda Blanc highlighted that the previous six months had been an “excellent” period. “Our scale and diversification give us resilience and opportunity, enabling Aviva to withstand the challenging economic climate,” she added.
Aviva is in a much healthier position now than it was just a few years ago, and much of that is down to Blanc. She was appointed CEO in 2020 and set about making the business more manageable and profitable. 
The business is considerably leaner than it used to be. Aviva made £7.5bn by selling off its operations in Italy, Turkey and France. And these sales were among eight non-core businesses that were offloaded. The business now focuses on core markets in the UK — where it serves some 18 million customers — Ireland, and Canada. 
The insurer currently trades with a price-to-earnings ratio of just 7.3. That’s very low, but reflects some fairly negative sentiments about the health of the UK economy and uncertainty around Brexit.
But I’d contend that Aviva is actually dirt-cheap, especially considering the impressive returns it offers to shareholders in the form of dividends. The business has already proven its capacity to operate in a difficult economic climate, but I think there are positives for the long term.
As a leaner and more stable business, Aviva should be able to offer steady growth in the future. I don’t expect the share price to shoot up, but a sizeable dividend yield and steady growth works for me.
In the near term, I appreciate there will be some challenges, but insurers are pretty resilient. I know the forecast recession is unlikely to be good for business, after all, less economic activity tends to translate into less business for insurers. So that’s something I’ll bear in mind.
But on the whole, Aviva looks like a strong, lean business that I’d buy more of right now. The yield is very attractive and will certainly help my portfolio fight back against inflation.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be considered so you should consider taking independent financial advice.
James Fox owns shares in Aviva. 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.
| Dr. James Fox
GSK shares had a bad time last week. They’re down 15% as investors’ sentiment soured ahead of litigation proceedings in…
Read more »
| Kevin Godbold
Asset bubbles keep on coming, and here’s what I’m doing to navigate through them and invest for the stock market…
Read more »
| Harshil Patel
UK shares can offer a lucrative path for passive income. Our writer considers a plan to double his State Pension.
Read more »
| Kevin Godbold
I reckon the best shares to buy now have strong growth in earnings and recent good news flow, such as…
Read more »
| Kevin Godbold
Here’s my three-step plan for achieving a growing income from dividend stocks and three companies I’d use to help execute…
Read more »
| Ben McPoland
Many British shares are trading cheaply and pay dividends. This is normally the hunting ground for Warren Buffett, yet he’s…
Read more »
| Stephen Wright
Finding the right opportunities can bring spectacular results. Here’s how our author has managed to increase his monthly passive income…
Read more »
| Christopher Ruane
Our writer is considering buying lithium shares for his Stocks and Shares ISA. Here, he outlines the decision process he…
Read more »
View All
Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be considered so you should consider taking independent financial advice.
To make the world Smarter, Happier, And Richer
Founded in 1993 by brothers Tom and David Gardner, The Motley Fool helps millions of people attain financial freedom through our website, podcasts, books, newspaper column, radio show and premium investing services.
Read more about us >

We have taken reasonable steps to ensure that any information provided by The Motley Fool Ltd, is accurate at the time of publishing. Any opinions expressed are the opinions of the authors only. The content provided has not taken into account the particular circumstances of any specific individual or group of individuals and does not constitute personal advice or a personal recommendation. No content should be relied upon as constituting personal advice or a personal recommendation, when making your decisions. If you require any personal advice or recommendations, please speak to an independent qualified financial adviser. No liability is accepted by the author, The Motley Fool Ltd or Richdale Brokers and Financial Services Ltd for any loss or detriment experienced by any individual from any decision, whether consequent to, or in any way related to the content provided by The Motley Fool Ltd; the provision of which is an unregulated activity.
The value of stocks, shares and any dividend income may fall as well as rise and is not guaranteed, so you may get back less than you invested. You should not invest any money you cannot afford to lose, and you should not rely on any dividend income to meet your living expenses. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, administrative costs, withholding taxes and different accounting and reporting standards. They may have other tax implications, and may not provide the same, or any, regulatory protection. Exchange rate charges may adversely affect the value of shares in sterling terms, and you could lose money in sterling even if the stock price rises in the currency of origin. Any performance statistics that do not adjust for exchange rate changes are likely to result in an inaccurate portrayal of real returns for sterling-based investors.
Fool and The Motley Fool are trading names of The Motley Fool Ltd. The Motley Fool Ltd is an appointed representative of Richdale Brokers & Financial Services Ltd who are authorised and regulated by the Financial Conduct Authority (FRN: 422737). In this capacity we are permitted to act as a credit-broker, not a lender, for consumer credit products. We may also publish information, opinion and commentary about consumer credit products, loans, mortgages, insurance, savings and investment products and services, including those of our affiliate partners. We do not provide personal advice and we will not arrange any products on your behalf. Should you require personal advice, you should speak to an independent, qualified financial adviser.
The Motley Fool Ltd. Registered Office: 5 New Street Square, London EC4A 3TW. | Registered in England & Wales. Company No: 3736872. VAT Number: 188035783.
© 1998 – 2022 The Motley Fool. All rights reserved. The Motley Fool, Fool, and the Fool logo are registered trademarks of The Motley Fool Holdings Inc.


Leave a Comment