At A 19-year High, Here’s What The Soaring Aviva Share Price Has Done To £10,000 Invested 5 Years Ago

This week’s seen the FTSE 100 insurer Aviva (LSE: AV) scale stock market heights it last hit back in 2007. With the Aviva share price now over £7, it remains far below its all-time high from the late 1990s, but still higher than it has been for almost two decades.

Not only that, but as the latest increase demonstrates, it’s had positive momentum in recent years.

So, what’s that meant for investors over the past few years â and could Aviva be worth considering?

Solid capital gains â and more!

Over the past five years, the Aviva share price has moved up by 78%.

That gain compares favourably to the (already impressive) 53% increase in the value of the wider FTSE 100 over that period.

£10,000 invested in Aviva shares five years ago would now be worth around £17,800.

But wait â thereâs more! A key attraction to Aviva is its dividend.

Currently, the dividend yield is 5.6%. That is far ahead of the 3% yield offered by the FTSE 100.

£10,000 invested at a 5.6% yield ought to earn around £560 per year in dividends. But someone who invested back then wouldnât now be earning a 5.6% yield.

As they bought when the share price was lower, they currently ought to be earning a dividend yield of roughly 10%. That’d mean the £10,000 would now be earning approximately £1,000 annually in passive income.

Where next for the dividend?

After a deep cut in 2020 â no companyâs dividend’s ever guaranteed to last — Aviva’s been growing its payout per share annually. It aims to keep doing so.

Last year, for example, the dividend per share grew an impressive 10% to 39.3p. At that point, the companyâs chief executive didnât simply reiterate that the company aims to keep growing the dividend.

She said it is âhighly committed to growing our dividendâ.

With that sort of language, management credibility rests on delivering. I therefore believe the companyâs board will be highly motivated to keep the dividend increases coming.

That requires cash, of course. But Aviva has a massive business and is the leading general insurer in its home UK market. That has been bolstered by last yearâs acquisition of rival Direct Line.

With its large customer base, economies of scale, long underwriting experience, and strong brand, I believe Aviva ought to keep generating lots of spare cash in coming years. I also expect it to keep growing its dividend.

Could things go downhill?

Then again, back in 2007, the Aviva share price was great â until it wasnât. In 2020, another challenging stock market saw Aviva cut its dividend â not for the first time.

Financial crises can be challenging for insurers and as that potted history shows, that’s true for a mammoth like Aviva. Any future crisis is a risk.

Its strong role in the UK market also poses a concentration risk, as well as making it more susceptible to being undercut on price by smaller, nimbler rivals.

Still, this looks like a quality company to me. I believe income seekers ought to consider the share.

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Christopher Ruane does not hold any positions in the companies mentioned.

The post At a 19-year high, hereâs what the soaring Aviva share price has done to £10,000 invested 5 years ago appeared first on The Twelfth Magpie.

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