If investors had bought £1,000 worth of Aviva shares 5 years ago, here’s how much they’d have made…
Over the last five years, Aviva (LSE:AV.) shares have been on fire, climbing by almost 130%! Under the new leadership of Amanda Blanc, the insurance giant has undergone a strategic refocus, which, when combined with the tailwinds of higher interest rates, has delivered strong financial results.
As such, any investor who put £1,000 to work at the start of her tenure in July 2020 is now sitting on an impressive £2,286.
However, with so much growth under its belt, can Aviva shares continue to climb higher? Let’s take a look.
Beating expectations
Under Blanc’s leadership, Aviva sold off its non-core international operations to refocus the company on three key markets: the UK, Ireland, and Canada.
This simplification has subsequently led to several efficiency gains and, in 2024, investors witnessed operating profits in the UK and Ireland skyrocket by 57% in the General Insurance segment. While its smaller operations in Canada didn’t fare as well, the overall results were a 20% jump in earnings, reaching £1,767m.
Skipping ahead to the first quarter of 2025, and this momentum’s continued. Subsequently, management’s projecting it will reach £2bn in annual operating income by 2026, along with £1.8bn in its Solvency II operating free capital generation. The latter’s particularly important since it represents the profits Aviva makes that can be used for reinvestment, dividends, and buybacks without eroding its regulatory safety buffers.
In other words, the already impressive 5.9% dividend yield (11th-highest in the FTSE 100) looks like it’s here to stay. And having just successfully acquired Direct Line, more impressive financial growth could be on the horizon.
What could go wrong?
At a price-to-earnings ratio of 26 and the stock trading near its 52-week high, Aviva shares can hardly be described as cheap. And with an average consensus analyst price target of 612p, it seems the firm’s future growth potential’s already largely baked into its valuation.
With that in mind, investors expecting more triple-digit growth on the horizon could be left disappointed. This is especially true if the Direct Line acquisition doesn’t perform as expected.
Institutional analysts have highlighted the £3.7bn deal as a critical catalyst for future growth, crucial for delivering £100m in annualised savings as well as boosting insurance margins to 13% by 2026. However, integrating a takeover of this scale’s no easy task. And unforeseen challenges could end up throwing a spanner into the works.
Another top concern is the rising cost of claims, with vehicle repairs in particular becoming increasingly expensive. This headwind could offset any gains made through efficiency improvements, harming profitability and potentially causing the company to fall short of its 2026 targets.
The bottom line
So are Aviva shares worth considering right now? While I’m sceptical investors will see the market cap double again in the near term, the long-term gains of a more dominant market position make me optimistic that good times lie ahead. There are obviously no guarantees, but the opportunity’s large enough for me to consider taking a deeper dive into this enterprise.
The post If investors had bought £1,000 worth of Aviva shares 5 years ago, here’s how much they’d have made⦠appeared first on The Motley Fool UK.
5 Shares for the Future of Energy
Investors who don’t own energy shares need to see this now.
Because Mark Rogers — The Motley Fool UK’s Director of Investing — sees 2 key reasons why energy is set to soar.
While sanctions slam Russian supplies, nations are also racing to achieve net zero emissions,
he says. Mark believes 5 companies in particular are poised for spectacular profits.
Open this new report — 5 Shares for the Future of Energy
— and discover:
- Britain’s Energy Fort Knox, now controlling 30% of UK energy storage
- How to potentially get paid by the weather
- Electric Vehicles’ secret
backdoor
opportunity - One dead simple stock for the new nuclear boom
Click the button below to find out how you can get your hands on the full report now, and as a thank you for your interest, we’ll send you one of the five picks — absolutely free!
More reading
- 2 soaring dividend shares to consider for both growth and income!
- Hereâs how a £20k ISA could earn £1,400 in passive income next year â and every year
- Prediction: in 12 months the eye-popping Aviva share price could turn £10,000 intoâ¦
- £20,000 in an ISA? Hereâs how it could be used to target passive income of £775 each month
- 3 big issues for buyers of FTSE 100 dividend shares
Zaven Boyrazian has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
