Interactive Investor

ii view: Aviva's new sustainable dividend policy

30th November 2020 16:47

Keith Bowman from interactive investor

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Its shares are down by around a fifth in 2020, but a strategy to simplify the business is ongoing.

Nine-month results to 30 September

  • Value of new business down 14% to £714 million
  • Interim dividend of 7p per share
  • A proposed 2020 final dividend of 14p per share, making for total of 21p per share
  • Last full-year dividend payment in 2018 came to 30p per share (9.25p + 20.75p) 

Chief executive Amanda Blanc said:

"We are making good progress in our strategy to simplify Aviva's portfolio and have recently announced the sale of Aviva Singapore and Aviva Vita in Italy for £2 billion.

"We are announcing today a new sustainable and resilient dividend policy, based on our core markets of the UK, Ireland and Canada. As we simplify Aviva's portfolio, we will deliver further value to shareholders by returning excess capital above 180% solvency cover ratio, once our debt leverage target ratio has been reached."

ii round-up:

Tracing its history back to 1696, Aviva (LSE:AV.) today provides life insurance, general insurance, health insurance and asset management to over 30 million customers.

It is now focused on its core markets of the UK, Ireland and Canada. Recent business disposals for both Italy and Singapore have been made. 

For a round-up of these nine-month results, please click here.

ii view:

Aviva's future vision involves making it a simpler, more competitive and more commercial business. The previous chief executive helped simplify the company into the five core divisions of Investments, Savings and Retirement, UK Life, General Insurance, Europe Life and Asia Life. Now under another head, businesses within Europe and Asia have been sold. The UK, Ireland and Canada have been designated as core. 

For investors, the new geographical emphasis reduces diversity and leaves it more dependent on its core markets. A rebasing of the dividend also offers some disappointment, although it is now hopefully set at a more sustainable level from which to take the company forward. That said, a reset dividend yield of over 6% is still attractive, while a strategy to prioritise margin over volume appears sensible. In all, there is still much to do for Aviva management, but a robust balance sheet, reset dividend policy and increased business focus make a firm platform from which to move forwards. 

Positives: 

  • Relatively new CEO looking to provide renewed clarity of purpose
  • Controllable costs fell by 5% to £2.8 billion

Negatives:

  • Second wave of lockdowns generate Covid outlook uncertainty
  • Reported lower with-profit volumes in France and Italy

The average rating of stock market analysts:

Buy

These articles are provided for information purposes only.  Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties.  The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.

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