Forget Spacex Shares! Investors Are Buying This Ftse 100 Stock Instead

Retail investing platform AJ Bell regularly posts the most-bought-and-sold stocks based on the data it has available from clients. Over the past week, it’s true that SpaceX was a stock that some people bought, but it wasn’t the number-one pick. That prize went to FTSE 100 giant Aviva (LSE:AV). Here’s why I think it’s so popular right now.

Noting the appeal

For starters, Aviva offers something increasingly difficult to find in the FTSE 100. It offers an attractive dividend alongside genuine earnings growth.

The company has a dividend yield of 5.5%, comfortably above the index average. For income investors, that’s particularly appealing, especially given the company’s commitment to increasing shareholder distributions.

Indeed, Aviva raised its interim dividend by 7% to 14p per share in August, reflecting management’s confidence in the underlying business.

The other angle why I believe investors are buying the stock now relates to strong earnings. Aviva’s first-half results were particularly impressive. Operating profit jumped 24% to £1.33bn, while operating earnings per share increased 10%. Cash remittances also surged 47% to almost £1.5bn, highlighting the company’s ability to generate cash for shareholders.

One of the biggest opportunities comes from its acquisition of Direct Line, completed last year. The deal has significantly strengthened Aviva’s position in the UK motor and home insurance markets. More importantly, management expects substantial cost savings from combining the two businesses, including around £225m in annual synergies.

Investors are clearly thinking ahead, because if these savings materialise as anticipated, it could provide a meaningful boost to profitability over the coming years.

Mulling everything

It’s worth noting that the share price is only up 5% over the past year and has lagged some stocks in the index. For example, one of its largest competitors is Legal & General. That share price is up 22% over the past year! Aside from the disappointing performance versus peers, there are other risks worth considering.

Insurance remains a competitive industry, with aggressive pricing potentially squeezing margins. Claims inflation, particularly in motor insurance, could also undermine profitability.

Meanwhile, integrating Direct Line presents execution risks, while volatile financial markets could affect Aviva’s investment and retirement businesses. There’s also uncertainty surrounding today’s (28 October) UK Autumn Budget, particularly if changes to pensions taxation discourage retirement saving.

My take

It did surprise me a little to see Aviva as the most popular stock. On the one hand, it combines strong cash generation, improving profitability and an attractive dividend with several opportunities for further expansion.

But it’s true that in terms of high share price growth for the coming year, I believe there are other options in the FTSE 100 that look more appealing. Therefore, I’m not excited to follow the crowd on this one. I’d rather save my cash and keep looking for better stock picks.

Should you invest £5,000 in Aviva Plc right now?

When investing expert Mark Rogers and his team have a stock tip, it can pay to listen. After all, the flagship Twelfth Magpie Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.

And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Aviva Plc made the list?

Jon Smith has no positions in the shares mentioned.

The post Forget SpaceX shares! Investors are buying this FTSE 100 stock instead appeared first on The Twelfth Magpie.

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