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Aviva‘s (LSE:AV.) a FTSE 100 share I opened a position about a year ago. I have increased my holdings since then. And I plan to increase my stake again when I have money to invest.
I believe the financial services giant looks very attractive in terms of growth and earnings. And its shares also look cheap in all sorts of ways.
That’s why I think the company is a top blue chip to consider right now.
Growing up
Earnings growth has not been clear at Aviva in recent years. Its value decreased during the Covid-19 crisis, and in 2022 due to the increase in interest rates.
But the company returned to growth in 2023. And City analysts expect profits to continue rising over the next three years at least, and by healthy double-digit percentages:
| A year | Earnings per share | Income growth |
|---|---|---|
| 2024 | 43.98 p | 17% |
| 2025 | 50.87 p | 16% |
| 2026 | 55.83 p | 10% |
These bright forecasts reflect analyst expectations for lower interest rates and improving economic conditions. Combined, this could stimulate consumer spending and boost the performance of Aviva’s asset management division.
The company will also benefit from ongoing demographic changes in its European and North American markets. An aging population means greater demand for retirement products, protection and wealth.
Assignments
Like earnings, Aviva’s dividend record has been up and down since 2019.
However, with earnings expected to soar – and the company’s balance sheet strengthened significantly under current CEO Amanda Blanc – shareholder payouts, which have risen slightly since the end of the pandemic, are said to follow suit:
| A year | Share of each share | Dividend growth |
|---|---|---|
| 2024 | 35.43p | 6% |
| 2025 | 38.13 p | 8% |
| 2026 | 40.88 p | 7% |
Assignments are not guaranteed. But Aviva’s cash-rich balance sheet puts it in a good position to meet these forecasts.
The Solvency II shareholder coverage ratio was 205% as of June, more than double the level required by regulators.
Price
Based on current earnings forecasts, Aviva shares trade on price-to-earnings growth (PEG) ratios 0.6 in 2024 and 2025, and 0.9 of 2026. Any reading below 1 indicates that the stock is undervalued.
Footsie Company also offers excellent value based on expected earnings. The dividend yield is huge 7.4% this year, 8% in 2025 again 8.6% in 2026.
In comparison, the average FTSE 100 share yield for the last period and the annual yield is 3.7%.
A great purchase
As with any UK share, Aviva exposes its investors to some risk. Profits and dividends can be disappointing if, for example, interest rates fail to fall gradually, which dampens product sales. It also faces intense competition from enthusiasts Legal & General, Zurich again AXA.
But on balance, I believe the potential benefits of owning Aviva shares outweigh these risks. And its low valuation provides a cushion in case the news flow turns negative, which could limit any pullback in the share price.
On balance, I think Aviva is one of the best ‘all-rounders’ in the FTSE 100 today.
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