This £11.5bn FTSE 100 firm has restarted its dividend. I’d buy its...

This £11.5bn FTSE 100 firm has restarted its dividend. I’d buy its shares today!


For 15 years from 1987 to 2002, I worked in the insurance industry in claims, legal and marketing positions. One private insurer I worked for was bought by a giant US corporation, triggering multi-million-pound payouts to directors. Similarly, FTSE 100 firms I worked for paid fat wages and bonuses to senior staff.

In short, I know all too well how highly profitable insurers are – and how life-changing working for them can be for top bosses!

Insurance is a lucrative business

As the world of insurance is based on sound statistical (actuarial) principles, insurers can be solid businesses to own shares in. Yesterday, I wrote about shares in Prudential. I see this FTSE 100 share as offering an attractive combination of income and growth.

Aviva is another great FTSE 100 firm

Aviva (LSE: AV) is another insurance share that I’d be happy to own. Like the Pru, it’s a big, beautiful FTSE 100 business with powerful brands and a bright (if unexciting) future

At today’s closing price of 292.2p, Aviva has a market value of £11.5bn – around a third of Pru’s size. However, Aviva shares may offer deeper value than Pru stock, because they have fallen by almost a quarter (23.7%) over 12 months.

Aviva shares suffered in the crash

On 12 November last year, Aviva shares were riding high, closing at 439.4p. Like the wider market, they crashed spectacularly during the March market meltdown. At their low, Aviva shares closed at 205.7p on 19 March – 86.5p below today’s price and a bargain of a lifetime, in my view.

In the spring, under pressure from its UK regulator and in order to preserve capital, Aviva suspended its dividend. However, the pandemic didn’t hit Aviva nearly as hard as first feared, so it has resumed this cash payout.

Another FTSE 100 dividend returns

The bad news for income-seeking investors is that Aviva has restored its dividend at a much lower level. The FTSE 100 firm had promised a total dividend for 2019 of 21.4p, but this was slashed to just 6p. This cash will be paid on 24 September to shareholders as at 13 August, so it’s not too late to grab it today.

The good news is that Aviva shares are still cheap, in my view. Although 2020 profitability and earnings will be hit by higher claims because of Covid-19, normal service should resume in 2021.

Right now, Aviva shares trade on a historic price-to-earnings ratio of 5.34, for a bumper earnings yield of 18.7%. I think that the much-reduced dividend yield of just 2% could easily triple or quadruple from here.

As an insurance business refocusing on the well-served markets of the UK, Ireland and Canada, Aviva is not an exciting share for day-traders. But its Solvency II ratio of 194% and excess capital demonstrate its financial strength. I see it as a solid, buy-and-hold FTSE 100 stalwart for value and income-seeking investors.

A Top Share with Enormous Growth Potential

Savvy investors like you won’t want to miss out on this timely opportunity…

Here’s your chance to discover exactly what has got our Motley Fool UK analyst all fired up about this ‘pure-play’ online business (yes, despite the pandemic!).

Not only does this company enjoy a dominant market-leading position…

But its capital-light, highly scalable business model has previously helped it deliver consistently high sales, astounding near-70% margins, and rising shareholder returns … in fact, in 2019 it returned a whopping £150m+ to shareholders in dividends and buybacks!

And here’s the really exciting part…

While COVID-19 may have thrown the company a curveball, management have acted swiftly to ensure this business is as well placed as it can be to ride out the current period of uncertainty… in fact, our analyst believes it should come roaring back to life, just as soon as normal economic activity resumes.

That’s why we think now could be the perfect time for you to start building your own stake in this exceptional business – especially given the shares look to be trading on a fairly undemanding valuation for the year to March 2021.

Click here to claim your copy of this special report now — and we’ll tell you the name of this Top Growth Share… free of charge!

Cliffdarcy has no position in any of the shares mentioned. The Motley Fool UK has recommended Prudential. 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.

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