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The past year has been a happy one for global investors. The S&P 500 index has leapt by 25.6% in the last 12 months, beaten by tech-heavy rival, the Nasdaq Composite (+35.6%). And though the FTSE 100 has added just 1.9% in this period, the Aviva (LSE: AV) share price has outperformed its parent index.
Aviva shares slide
On Sunday, 7 April, I wrote an article wondering if/when Aviva shares might clear the £6 mark. But the share price then slumped on Thursday, 11 April, perhaps catching some shareholders by surprise.
Then again, as explained in Douglas Adams’ brilliant 1979 sci-fi novel The Hitchhiker’s Guide to the Galaxy: don’t panic!
Ex-dividend Thursday
For historic reasons, many shares listed in London go ‘ex-dividend’ on Thursdays. If I buy a stock on its ex-dividend day, I am not entitled to the next cash dividend. Instead, this cash payout goes to the seller and I lose out.
When shares go ex-dividend and lose this payout, their prices usually drop to reflect the loss of this passive income. This duly happened for Aviva, whose stock went ex-dividend for a payment of 22.3p a share last Thursday.
On Wednesday, 10 April, the Aviva share price closed at 489.9p. On Thursday, it finished at 458.8p, falling 31.1p. This 6.3% fall reflected the loss of the dividend, plus extra price weakness on the day.
Happy to be aboard Aviva
On Friday, the Aviva share price closed at 460.2p, valuing this insurance and asset-management group at £12.5bn. Here’s how the shares have performed over six timescales:
| Five days | -6.1% |
| One month | -3.5% |
| Six months | 12.2% |
| YTD 2024 | 5.9% |
| One year | 8.3% |
| Five years | 7.9% |
Despite their latest fall, Aviva shares are up over 12% in the past half-year. They have also produced single-digit gains over one year and five years. However, these figures exclude dividends.
The latest dividend — 22.3p a share — will be paid to shareholders on 23 May. That’s worth 4.8% of the current Aviva share price — a nice return for patient income investors, including me.
My wife and I paid 397p a share for our holding in late July 2022, which we bought for its market-beating income stream.
From 2021 to 2023, Aviva’s total dividend per share leapt from 22.05p to 33.4p, a whopping increase of 51.5% in two years. After its latest price fall, Aviva stock offers a market-thrashing dividend yield of nearly 7.3% a year. That’s almost twice the Footsie‘s yearly cash yield of 4%. Nice.
Never an easy ride
To date, we have received 42.1p a share in Aviva dividends, with 22.3p coming next month. That totals 64.4p, or almost a sixth (16.2%) of our initial investment.
That said, income/value investing is no sure-fire route to riches, as future dividends are not guaranteed. Thus, they can be cut or cancelled without notice. But CEO Amanda Blanc is making good progress in selling Aviva’s non-core businesses and other restructuring.
Lastly, insurance is a game of risk, with insurers losing out from the harsh winter weather of 2022-23. Likewise, their share prices plunged during the Covid-19 crisis in 2020. Nevertheless, we are on board Aviva as long-term shareholders/owners!