The Aviva (LSE: AV.) share price has put on a strong performance in 2024. Year to date, the stock’s up 13.1%. In the last 12 months, Aviva’s risen an impressive 24.5%. That’s without considering its chunky 7% dividend yield.
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Bearing that in mind, would Aviva make a savvy addition to my portfolio today? The insurance stalwart has been on a watchlist for a while. As its share price gains momentum, is now my time to pounce?
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As with any stock I buy, I ask if I could see myself holding its shares for the next decade or, preferably, longer. With Aviva, I think there’s certainly a case to be made.
Passive income
There are a handful of reasons I say that. Let’s start with the passive income opportunity. As I write, its shares yield a whopping 7%. That’s comfortably above the FTSE 100 average of 3.6%. In the index, there are just four companies that offer a higher payout.
While dividends are of course never guaranteed, I’m confident we could see Aviva’s payout rise in the years to come. Last year the business upped its total dividend by 8% to 33.4p per share. Its first-half results this year revealed that its interim dividend was being hiked by 7% to 11.9p.
Its forward yield for the upcoming year is 7.1%. By 2026, some predict it could reach as high as 8.4%.
Alongside that, management’s shown its willingness to keep rewarding shareholders. We most recently saw this with the £300m share buyback programme the firm set in motion.
Making good progress
Then there’s the business itself, which has made an impressive turnaround in the last couple of years. Aviva’s been critiqued in recent times for being an inflated business. But since taking over, CEO Amanda Blanc’s made good strides in streamlining Aviva.
Under her leadership, Aviva has offloaded struggling units and put more emphasis on profitable regions. In its half-year update, the firm announced that operating profit had jumped 14% to £875m. Speaking on the progress Aviva has made, Blanc said: “Our plan to deliver more for customers and shareholders is working really well.”
The threats
But while Aviva’s made good ground with its turnaround, I see a few risks. Firstly, its streamlining mission now means it’s more reliant on just a couple of core markets. Should they experience a downturn, this could see Aviva suffer.
What’s more, the insurance industry’s very competitive, with plenty of large players in the space. The rise of smaller, more nimble competition such as insurtechs could also prove to be a challenge for the firm.
I’d buy today
But I think Aviva could make a shrewd buy today. I like the direction the business is heading in under Blanc. I also love the meaty income on offer. I’d happily buy the stock today if I had the cash and hold it for years to come.
