As uncertain times look set to continue into the next year, I’m looking at dividend shares for more stability in my portfolio. A healthy and reliable dividend payout can ease my anxiety about falling markets. And I might be able to use the incoming cash to buy shares on the cheap.
Of course, companies that offer generous and consistent dividends are highly valued. So research is key to make sure I don’t overpay. As I’m looking towards 2023, one in particular has caught my eye.
The British insurance and pensions giant Aviva (LSE:AV) has a long track record of consistent payouts. Moreover, its share price dipped earlier this year, which makes its most recent dividend forecast all the more tempting.
Past dividend yields
When analysing the dividend payouts, it’s important to look at the yield. This is the percentage of the share price that is paid back to shareholders over a yearly period.
For Aviva, the last five years have netted a dividend yield for shareholders of 7.1%, 10.9%, 3%, 10.5% and 7.1%. Those are figures that I’d be very happy with, especially as I’m less confident about growth shares looking towards 2023.
Aviva makes two dividend payouts throughout the year – typically an interim dividend in October and a final dividend in May. That does mean that, as of writing, I have just missed the opportunity for a payout. However, I’m in this for the long term, so it doesn’t bother me.
The most attractive part is that the most recent payout of 10.3p is higher than any of the last five years. And on top of that, the dividend cover – the number of times a company can cover its total dividend payout to shareholders with earnings – sits at a healthy 1.9.
Future Projection
In Aviva’s most recent trading update, the dividend guidance was 31p per share for 2022 and 32.5p per share for 2023. That would mean, based on today’s share price, a dividend yield of 7.0% for 2022 and 7.3% for 2023.
Obviously, nothing is certain. But given Aviva’s large size and consistent track record delivering dividends, I’d be confident to receive those amounts.
Stagnating share price
While things look rosy on the dividend front, things aren’t so pretty when looking at the historical share price. In fact, Aviva’s share price has stagnated so much that you could’ve bought in at today’s price back in the 1980s. That’s over three decades without growth in shares.
The question I’m asking myself is: do I want a stock that I could hold for decades and not see a return when I sell it?
Well, it’s clear that Aviva is an income share. I can’t expect growth in the stocks, but the regular and healthy dividends offer a useful hedge against down markets. In these tough times, this might be just what my portfolio needs. And that’s why I’ll be considering this to help me ride out the next year or two.
