Yahoo Finance Aviva (LON:AV.) Could Be A Buy For Its Upcoming Dividend
It looks like Aviva plc (LON:AV.) is about to go ex-dividend in the next 3 days. Ex-dividend means that investors that purchase the stock on or after the 13th of August will not receive this dividend, which will be paid on the 24th of September.
Aviva's next dividend payment will be UK£0.06 per share, and in the last 12 months, the company paid a total of UK£0.15 per share. Last year's total dividend payments show that Aviva has a trailing yield of 5.3% on the current share price of £2.936. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to investigate whether Aviva can afford its dividend, and if the dividend could grow.
View our latest analysis for Aviva
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Aviva paid out just 11% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances.
Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings fall far enough, the company could be forced to cut its dividend. With that in mind, we're encouraged by the steady growth at Aviva, with earnings per share up 2.8% on average over the last five years.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Aviva's dividend payments per share have declined at 4.3% per year on average over the past 10 years, which is uninspiring. Aviva is a rare case where dividends have been decreasing at the same time as earnings per share have been improving. It's unusual to see, and could point to unstable conditions in the core business, or more rarely an intensified focus on reinvesting profits.
To Sum It Up
Is Aviva an attractive dividend stock, or better left on the shelf? Aviva has seen its earnings per share grow slowly in recent years, and the company reinvests more than half of its profits in the business, which generally bodes well for its future prospects. We think this is a pretty attractive combination, and would be interested in investigating Aviva more closely.
With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. Every company has risks, and we've spotted 2 warning signs for Aviva you should know about.
If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.
This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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