Aviva Share Price: Insured Against Further Losses?

Do Aviva shares deserve careful consideration?
Over the past three years, the Aviva share price has performed significantly better than its peers, Legal & General and Phoenix. In fact, Aviva shares are up 44% while Legal & General is up only 5%. This reflects the positive reception of the strategic overhaul. However, over ten years, the stock has had a much flatter performance. This is partially because Aviva prefers to reward shareholders through dividends.
Therefore, those who invest for passive income will be attracted by the whopping 8% dividend yield and assuring track record Aviva holds in relation to its payouts. Having said that, dividends are a perception of limited growth opportunities. Consequently, dividend stocks like Aviva shares may offer lower capital appreciation potential compared to growth stocks that reinvest earnings back into the business.
Even so, taking the current Aviva share price into consideration, there’s certainly room for upward movement. Analysts’ consensus suggests EPS in 2023 of 52.5p before moving up to 61.1p in 2024, and 67.3p in 2025. This gives Aviva shares a forward P/E of 7.8 – a figure nearly half the FTSE 100’s average. These forecasts infer Aviva will experience significant growth in the medium term.
Challenges do remain under the current macroeconomic conditions — most notably in claims inflation. For context, inflation drives up the cost of goods and services. These include medical expenses, vehicle repairs, legal costs, etc. This could lead to higher claim payouts and potentially strain the firm’s profitability, which is something investors in Aviva shares must be aware of.
Despite that, the Aviva share price is unlikely to sink drastically due to its already cheap forward multiples. This suggests a compelling investment opportunity with passive income generation. The forecasted earnings and the relative affordability of Aviva shares in relation to its expected future profits underscore its potential as an undervalued asset deserving of careful consideration.
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