Insurance coverage firm Aviva (LSE: AV) is a well-liked revenue inventory amongst many traders. The Aviva dividend yield is a juicy 6.8%. And in its interim outcomes launched at this time (14 August), the FTSE 100 member introduced its newest dividend improve.
So, is that this a share I ought so as to add to my portfolio for its passive revenue potential?
Interim dividend improve
The rise within the interim payout per atypical share introduced at this time means it’s set to extend by 7% in comparison with final 12 months’s equal. It can stand at 11.9p.
If the identical improve applies on the full-year stage – which isn’t assured – that may imply an annual dividend of round 35.7p per atypical share. That might put the possible Aviva dividend yield at 7.3%.
That displays the sturdy progress of current years. As lately as 2021, the payout per atypical share stood at 22.05p.
Long term although, the dividend image has been extra combined. The dividend for every atypical share was lower by virtually a 3rd in 2020.
Promising outlook
Though such cuts are a threat with any dividend, that doesn’t imply they’re painless. From an revenue perspective, that deep 2020 lower put me off proudly owning Aviva shares for a while.
That stated, the previous few years have seen the enterprise reshape itself to concentrate on its core enterprise. It has continued to display its money era potential. That’s necessary on this context as a result of it may possibly assist fund the shareholder payout.
As the corporate’s chief govt stated in at this time’s announcement: “Gross sales are up. Working revenue is up. The dividend is up. Our plan to ship extra for patrons and shareholders is working very well.”
Extra attention-grabbing from the dividend perspective, for my part, was a notable improve in working funds era and working personal capital era. However I do additionally assume the gross sales progress displays the success of Aviva’s business technique. It has been attempting to develop its base of UK prospects by providing them a one-stop service for a variety of monetary wants. That appears to be working properly to elevate revenues.
With its massive buyer base (virtually 5m UK prospects maintain a number of insurance policies with the agency), a robust model and deep underwriting expertise, I’m optimistic concerning the outlook for Aviva – and its dividend.
I’d fortunately use this passive revenue thought
Nonetheless, as any insurer is aware of, the surprising can occur. Retirement product gross sales fell within the first half, one thing I believe might proceed to occur as a consequence of a contracting fairness launch market.
Pricing is all the time an necessary think about insurance coverage profitability. The previous a number of years have witnessed sharp premium will increase throughout a lot of the UK insurance coverage market. That would lay the foundations for pricing battles in future, hurting revenue margins.
On steadiness, although, I believe the interim outcomes present additional grounds for confidence within the outlook.
Aviva has confirmed it’s prepared and capable of develop its dividend considerably. I believe the share appears moderately priced and would fortunately purchase some for my portfolio if I had spare money to take a position.
