Many FTSE stocks have dipped recently since rising inflation worries, the cost of living crisis, and the tragic events in Ukraine have impacted worldwide markets. Aviva (LSE:AV) is no different. As I write, the Aviva share price has recovered since 7 March lows. Should I add the shares to my holdings? Let’s take a closer look.
The Aviva share price bounces back
Aviva is known as the largest insurance business in the UK. It has over 15m customers throughout the UK. Aviva offers car, home, health, and life insurance as well as investment products. Insurance is a must for consumers and businesses alike. Due to this I believe despite economic uncertainty, insurance demand shouldn’t be affected.
As I write, Aviva shares are trading for 438p. At this time last year, the shares were trading for 397p, which is a 10% return over a 12-month period. A 12-month picture does not tell the whole story, however. The recent pressure on stocks saw Aviva shares fall as low as 374p on 7 March. The Aviva share price has increased by 17% in just over two weeks to current levels.
For and against investing
FOR: Aviva has often been seen as a bloated business. Well, in the past couple of years, it has decided to sell non-core business and focus its efforts on key markets such as the UK, Ireland, and Canada. Sale of non-core businesses has led to it declaring the proceeds will pay down debt, help reinvest in the restructure, as well as reward investors via dividend payments.
AGAINST: There is a downside to creating a new streamlined profitable business. It sounds simple on paper and in theory. There is still lots of work to do and there is a lot of negative investor sentiment despite recent moves. I think a couple of years of positive results showing profitability and consistent returns will provide me with a better picture as to whether or not the restructure is working for Aviva.
FOR: The current Aviva share price offers a dividend yield of over 5%. It is worth mentioning the FTSE 100 yield average is 3%-4%. Dividends are an attractive prospect as they would help me make a passive income from my holdings. A recent share buyback scheme introduced by Aviva would boost this.
AGAINST: Despite looking like a good dividend option for my holdings, it is worth noting that dividends can be cancelled at any time. I think the ongoing restructure could paint a clearer picture as to whether or not consistent progressive dividends would be paid. This uncertainty is off-putting.
What I’m doing now
When a large business decides to restructure and become leaner and more focused, it is hard to execute plans and the future can seem uncertain. To date, Aviva has sold eight non-core businesses, returned capital to shareholder, and has vowed to continue to do so.
I believe the Aviva share price will increase in the coming months but only steadily. I believe investor sentiment will improve after another few set of results, perhaps next year’s annual results. Currently, I’d happily add Aviva shares to my holdings. Aviva shares possess an enticing dividend yield and the restructure does look to be working. I will keep an eye on developments and future results, however.
The post The Aviva share price has bounced back from a recent dip! Here’s what I’m doing now appeared first on The Motley Fool UK.
Are you on the lookout for UK growth stocks?
While it’s available: you’ll discover what we think is a top growth stock for the decade ahead.
And the performance of this company really is stunning.
In 2019, it returned £150million to shareholders through buybacks and dividends.
We believe its financial position is about as solid as anything we’ve seen.
Since 2016, annual revenues increased 31%
In March 2020, one of its senior directors LOADED UP on 25,000 shares – a position worth £90,259
Operating cash flow is up 47%. (Even its operating margins are rising every year!)
Quite simply, we believe it’s a fantastic Foolish growth pick.
What’s more, it deserves your attention today.
So please don’t wait another moment.
Jabran Khan 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.