Are Aviva shares one of the UK’s best investments today?
Aviva (LSE: AV.) shares are a extremely popular funding in the meanwhile. On Hargreaves Lansdown’s platform, they have been among the many high 10 Shares and Shares ISA investments within the first 10 days of the 2024/2025 tax 12 months.
With their excessive dividend yield, I can see why traders are drawn to the shares. As a long-term investor in search of excessive complete returns (capital positive factors plus dividends) may I do higher although? Let’s talk about.
Engaging, at first look
At first look, Aviva shares do have quite a bit going for them. For a begin, they commerce at a considerable low cost to the market. At the moment, Aviva has a forward-looking price-to-earnings (P/E) ratio of simply 10.7 versus 13.8 for the FTSE 100. So they seem to supply worth.
Secondly, the corporate’s been performing properly just lately. Final 12 months, group working revenue was up a wholesome 9% 12 months on 12 months to £1,467m. “Our prospects have by no means been higher”, commented CEO Amanda Blanc within the firm’s full-year outcomes.
Third, there’s the massive dividend, which I discussed earlier. For 2023, the group declared a complete payout of 33.4p per share, which interprets to a yield of about 7.1% as we speak.
An odd inventory
The factor is although, Aviva is a little bit of an odd inventory. Up to now, it’s usually seemed low-cost. However this hasn’t actually translated into returns for traders. Consider it or not, during the last 10 years, its share value has truly gone backwards (by about 10%).
That’s disappointing, particularly when you think about that a variety of UK shares have doubled or tripled in value over that point interval.
Simply have a look at accounting software program firm Sage (which I personal shares in). Its share value has gone from 400p to 1,165p in that point. And the corporate’s additionally paid good dividends.
In fact, Aviva’s large dividends have offset the dearth of share value positive factors to a level. However these have been a bit inconsistent.
I learnt this the laborious manner as I owned the shares in 2020 when the corporate slashed its dividend payout. Not solely did I face much less dividend earnings on account of the lower however I used to be additionally hit with nasty share value losses.
On the time, I got here to the conclusion that certainly one of Aviva’s issues was a scarcity of edge. It operates in a very aggressive trade (that may be turbulent at instances) and doesn’t actually have a real aggressive benefit or ‘financial moat’ as billionaire investor Warren Buffett likes to say.
That’s not ultimate from an funding perspective.
My view on Aviva
Now, I don’t wish to sound too bearish on Aviva. It’s a stable firm that’s performing fairly properly in the meanwhile. And the dividend yield is presently enticing. So it might be inventory for earnings seekers.
Nevertheless, personally, the shares don’t strike me as a ‘must-own’ funding. I feel there are different shares on the London Inventory Change which might be able to offering increased complete returns within the years forward.