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Dividend shares can assist construct wealth, however one of the best ones are usually not simple to establish, for my part. There are many issues to contemplate. The largest level for me is that dividends are by no means assured.
I wish to take a more in-depth have a look at Aviva (LSE: AV.) as doubtlessly among the best on the FTSE 100 index.
It operates within the monetary companies business, the place I perceive there are dangers, however juicy rewards available too.
Let’s have a look at some current developments, fundamentals, and dangers forward that may assist form a solution to my opening query.
Newest information
Aviva at the moment introduced interim outcomes for the six months ended 30 June 2024, and so they made for good studying.
Gross sales throughout its insurance coverage, wealth, and retirement divisions rose by 12% in comparison with the identical interval final 12 months. Plus, insurance coverage premiums elevated by 15%. Working revenue got here in at 14% greater, and its interim dividend was hiked by a formidable 7%.
Regardless of financial turbulence being a significant menace, Aviva appears to be thriving. I can’t assist however surprise how the agency could fare in greener pastures.
Fundamentals and future outlook
Beginning with returns, a dividend yield of seven.3% is considerably greater than the FTSE 100 common of three.6%.
Transferring onto valuation, Aviva shares look wonderful worth for cash on the 2 essential metrics I exploit to gauge worth. They commerce on a price-to-earnings progress (PEG) ratio of 0.5. Any sub-1 studying signifies worth. Moreover, the shares commerce on a price-to-earnings ratio of 12, which is near the index common, however nonetheless good for what I think about a unbelievable firm.
It’s laborious to disregard Aviva’s model energy, monitor report, and skill to generate money hand over fist. This might result in continued investor rewards, progress to spice up earnings, in addition to share buybacks. For instance, demand for wealth, insurance coverage, and retirement merchandise is just rising within the UK, Canada, and Eire, all its core territories.
Dangers to notice
Regardless of navigating the present financial turbulence nicely, as proven by interim outcomes, continued stress might affect earnings and profitability. Shopper spending on non-essential merchandise akin to wealth administration or life insurance coverage, could possibly be squeezed. That is one thing I’d keep watch over.
Maybe a smaller difficulty I’d keep in mind is that of intense competitors out there. Nonetheless, Aviva’s attain and model energy might negate the specter of this difficulty.
My verdict
Taking all the things under consideration, I do assume Aviva shares characterize among the best dividend shares to assist construct wealth. A lovely market place, good fundamentals, and thrilling future prospects assist me come to my resolution. Dangers talked about might damage the agency, however the execs outweigh the cons for me.
If I had some spare money at the moment, I’d like to snap up some shares.
