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Aviva (LSE: AV) shares idled for years, but now it looks like they were only biding their time before the big push.
Blue-chip FTSE 100 insurers are admired for the dividend income they pay, rather than share price growth. So we have to sit back and marvel at Aviva, which has delivered both in spades.
Is this now a growth stock?
The Aviva share price is up just over 27% in the last 12 months. Throw in the trailing yield of 5.8%, and the total return is close to 33%.
Aviva hasn’t simply ridden a sector recovery. This is largely its own doing. Close competitor Legal & General Group is actually down 2% over the same period.
Across five years, the Aviva share price is up a staggering 151%. That’s measured from the lows of the 2020 pandemic, which flatters the figure. But here’s the thing, in the same period, Legal & General is up just 18%. This is annoying, because I chose it over Aviva.
That stunning 151% share price growth would have lifted a £10,000 investment to £25,100. All dividends are on top. And with Aviva yielding as much as 7% or 8% during that period, there was plenty of income to be had.
Shareholder payouts
Let’s say an investor bought the stock five years ago today, on 28 May 2020. With the shares trading at 244p each, £10,000 would have picked up a total of 4,098 shares.
They would have received their first dividend on 24 September that year, an interim payout worth 6p for every share purchased. That would have been worth £246, but there have been a lot more since. In total, Aviva has handed investors a total of 149.5p in dividends per share over the last five years.
With 4,098 shares, that would add up to £6,112 in total dividends. Added to that £25,100 of capital, it would lift the total return to a mighty £31,212. They might have got more with dividends reinvested, but that’s too complex for me to calculate.
So in five years a supposedly boring old-school FTSE 100 insurer has more than tripled investors’ money. This shows the power of dividends – but it really helps if investors get some growth as well.
Revenues up, balance sheet solid
So what next?
On 9 May, Aviva reported a “great start” to the 2025 financial year, with general insurance premiums up 9%. CEO Amanda Blanc declared herself “very positive” about hitting full-year guidance, hailing a strong balance sheet and fast-growing business.
Like almost every stock, it was caught up in tariff volatility, but has since recovered nicely.
I can’t imagine Aviva shares rising at the same lick over the next five years though. They now look more expensive, with a price-to-earnings ratio of around 26. When I considered buying them a couple of years ago, the P/E was around six or seven. The yield was higher too, nudging 7.5%.
Aviva operates in a competitive market, and rivals like Legal & General may play catch-up at some point. Or maybe that’s me dreaming, having backed the wrong horse.
I still think the shares are well worth considering, I’m just not sure they’ll be quite as rewarding over the next five years. But we never know.
