The Aviva (LSE:AV.) share price has been on a great run since the stock market correction in March. The shares look good value for money as well as offering me a passive income opportunity. Should I buy the shares for my holdings? Let’s dig deeper to find out.
Aviva share price soars
As a quick reminder, Aviva is the largest insurance business in the UK. It has over 15m customers and a long track record, with roots stretching back over 300 years.
So what’s the current state of play with the Aviva share price? Well, as I write, the shares are trading for 430p. At this time last year, the stock was trading for 396p, which equates to an 8% return over a 12-month period. More recently, the shares have returned nearly 20% since March, when they dropped to 360p.
Should you invest £1,000 in Aviva right now?
When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Aviva made the list?
Risks to note
Aviva has been a passive income-seekers’ haven in recent times. This is one of the things that has drawn my attention to the stock as well as the recent Aviva share price resurgence. I am conscious, however, that dividends are never guaranteed. They can be cancelled at the discretion of the business at any time. In fact, Aviva cancelled its dividend when the pandemic struck, like many other stocks. Furthermore, subsequent dividends have been less than at pre-pandemic levels.
Next, Aviva has been in the process of streamlining operations and disposing of non-core businesses. It decided to undertake this exercise to push growth, and get rid of unprofitable businesses that have actually left it with debt. Debt is usually a red flag for me, even more so in times of economic uncertainty like now. Restructuring, paying down debt, and maintaining growth and consistent returns is no easy feat. I will keep an eye on developments on all fronts against the current economic volatility.
Why I like Aviva shares and would buy them
So to the bull case then. I like Aviva shares for a few key reasons. The first has to be the level of returns on offer and the fact it seems to be cash-rich and willing to return this cash to investors. At current levels, Aviva’s dividend yield stands just under 7%. This is higher than the FTSE 100 average of 3%-4%. It confirmed a £1bn share buyback scheme in March and intends to announce another when full-year results are due later in the year.
Next, despite the Aviva share price being on a great run in recent months, the shares still look good value for money. The FTSE 100 average price-to-earnings ratio sits close to 15. Aviva’s ratio is currently six.
Furthermore, Aviva has defensive traits, in my opinion. No matter the economic outlook and backdrop, car insurance is a must. Based on Aviva’s profile and presence, it should be able to leverage this position into performance growth and returns.
To summarise, I think Aviva is an excellent stock to add to my holdings for the passive income opportunity alone. As a bonus, it is a market leader in its respective sector, with growth plans and a willingness to return cash to investors. I would buy the shares today.
