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Investors who want to cash in on Aviva plc’s (LSE:AV.) upcoming dividend of £0.19 per share have only 5 days left to buy the shares before its ex-dividend date, 05 April 2018, in time for dividends payable on the 17 May 2018. Is this future income stream a compelling catalyst for dividend investors to think about the stock as an investment today? Let’s take a look at Aviva’s most recent financial data to examine its dividend characteristics in more detail. View our latest analysis for Aviva
5 questions to ask before buying a dividend stock
Whenever I am looking at a potential dividend stock investment, I always check these five metrics:
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Is their annual yield among the top 25% of dividend payers?
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Has it paid dividend every year without dramatically reducing payout in the past?
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Has it increased its dividend per share amount over the past?
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Does earnings amply cover its dividend payments?
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Will it be able to continue to payout at the current rate in the future?
How does Aviva fare?
Aviva has a trailing twelve-month payout ratio of 78.25%, which means that the dividend is covered by earnings. In the near future, analysts are predicting lower payout ratio of 55.99%, leading to a dividend yield of 6.78%. However, EPS should increase to £0.47, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment. Reliablity is an important factor for dividend stocks, particularly for income investors who want a strong track record of payment and a positive outlook for future payout. Not only have dividend payouts from Aviva fallen over the past 10 years, it has also been highly volatile during this time, with drops of over 25% in some years. This means that dividend hunters should probably steer clear of the stock, at least for now until the track record improves. Relative to peers, Aviva has a yield of 5.53%, which is high for Insurance stocks.
Next Steps:
With these dividend metrics in mind, I definitely rank Aviva as a strong income stock, and is worth further research for anyone who considers dividends an important part of their portfolio strategy. Given that this is purely a dividend analysis, you should always research extensively before deciding whether or not a stock is an appropriate investment for you. I always recommend analysing the company’s fundamentals and underlying business before making an investment decision. I’ve put together three key aspects you should further research:
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Future Outlook: What are well-informed industry analysts predicting for AV.’s future growth? Take a look at our free research report of analyst consensus for AV.’s outlook.
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Valuation: What is AV. worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether AV. is currently mispriced by the market.
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Other Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.