The FTSE 100-listed Aviva Plc (GB:AV) is an attractive dividend stock, offering a high yield to income-seeking investors. Aviva, one of the leading insurance companies in the world, offers a dividend yield of nearly 7.5%, way ahead of the sector average of 2.1%. Moreover, analysts expect the stock to deliver a decent upside over the next 12 months and enhance total returns for investors.
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TipRanks provides a range of tools to assist users in identifying lucrative dividend stocks. Here, we used the TipRanks’ Top Dividend Shares tool for the U.K. market to identify Aviva stock. This tool simplifies the stock selection process, making it easier for users seeking exposure to dividend-paying investments.
Dividends Supported by Solid Fundamentals
Aviva paid an interim dividend of 11.1p for the first half of FY23, reflecting an 8% year-over-year growth. The company aims to pay a total dividend of 33.4p for the full year 2023.
Aviva’s dividends are supported by solid fundamentals. The group’s operating profit increased 8% to £715 million in the first half of FY23 from the comparable period of the previous year. The company’s balance sheet remains strong. Despite declining in the recent reporting periods, Aviva’s estimated Solvency II shareholder cover ratio continues to be above 200%.
In its November update for the third quarter, Aviva expressed confidence in beating its medium-term financial targets. The company reaffirmed the FY23 operating profit growth estimate of 5% to 7%, even as it faced higher weather-related claims.
Aviva is focused on increasing its presence in high-growth areas, like the Wealth business. Additionally, the British insurance company aims to enhance its profitability by driving continued efficiency. The bank set its cost reduction target for 2023 at £750 million.
Is Aviva a Good Stock to Buy Now?
Last week, Jefferies analyst Philip Kett increased his 2023 share buyback estimate for Aviva to £350 million from £330 million. The analyst expects buybacks from 2024 onwards to increase by £50 million annually.
Kett increased his buyback estimate as he believes that Aviva now has “more firepower” to pay special capital returns, given its robust Solvency II ratio. Moreover, he highlighted that the 2023 operating profit growth estimate is appealing.
Based on his bullish stance, Kett reiterated a Buy rating on AV stock and increased the price target to 490p from 480p.
Aviva scores a Moderate Buy consensus rating based on three Buys and three Holds. The Aviva plc share price forecast of 477.83p implies 12.4% upside potential.
