Many top FTSE 100 companies are currently offering dividends that knock spots off the interest you can get from cash or bonds.
In this festive series of articles, I’m assessing how the companies measure up as income-generators, by looking at dividends past, dividends present and dividends yet to come.
Today, it’s the turn of insurance group Aviva (LSE: AV) (NYSE: AV.US).
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Dividends past
The table below shows Aviva’s five-year earnings and dividend record.
| 2008 | 2009 | 2010 | 2011 | 2012 | |
|---|---|---|---|---|---|
| Earnings per share (EPS) from continuing operations |
-15.7p | 35.3p | 37.6p | 11.1p | -15.2p |
| Dividend per share | 33.0p | 24.0p | 25.5p | 26.0p | 19.0p |
| Dividend growth | 0.0% | -27.3% | +6.3% | +2.0% | -26.9% |
As you can see, Aviva has an appalling dividend record over the last five years. In fact, the company’s record as a serial cutter extends to three annual dividend ‘rebasings’ since the turn of the millennium.
Despite the hefty cuts of 2009 and 2012, the total of 127.5p a share in dividends paid out over the last five years compares with EPS of just 53.1p.
Aviva’s dividend performance for the period is easily the worst of the big blue-chip insurers, and the company remains in the midst of a turnaround.
Dividends present
Aviva has so far paid an interim dividend of 5.6p for the current year. The analyst consensus is for a final dividend of 9.5p when the company announces its annual results in March — giving a 2013 full-year payout of 15.1p (down 20.5% on 2012). The consensus for EPS is around 43p, covering the dividend 2.8 times.
However, it should be noted that individual analyst forecasts vary widely around the consensus, as is to be expected with all the uncertainty of a turnaround situation.
At a share price of 430p, Aviva’s current-year dividend consensus represents a yield of 3.5%.
Dividends yet to come
For 2014, analyst forecasts are again widely spread. The consensus for the dividend is around 16.5p, with EPS around 47p, maintaining cover at 2.8 times.
Anyone who invested in Aviva between 1990 and 2007, and who still holds the shares, has been ill-served by the company. Will this serial dividend-cutting dog be able to learn a new trick of delivering sustainable income growth? It can only be a shot in the dark.
