A new CEO is driving this insurance company to higher profits. The shares have a current dividend yield of 3.15%, paid semi-annually.
Aviva plc (AVVIY)
From Cabot Undervalued Stocks Advisor
Aviva, PLC, based in London, England, is a major European insurance company specializing in life insurance, savings, and investment management products. Its market cap is about $21 billion, and is expected to generate about $65 billion in revenues and about $2.8 billion in profits in 2020.
Long a mediocre company, the frustrated board last July installed Amanda Blanc as the new CEO, with the task of fixing the business. She is aggressively refocusing the company on its core geographic markets (UK, Ireland, Canada), with its continental Europe and Asia operations potentially on the selling block. Recently, Aviva announced the sale of its operations in Turkey. The turnaround also includes improving Aviva’s product competitiveness, rebuilding its financial strength and trimming its bloated costs.
The new leadership reduced the company’s dividend, but to a more predictable and sustainable level that will be on a modest but upward trajectory. The stock trades at 6.7x estimated 2021 earnings and about 90% of tangible book value.
With the company’s aggressive operating and strategic improvement, we expect higher earnings and a modest multiple expansion will lift the shares to our $14 price target. While the ordinary shares trade in London, American investors can buy the American Depositary Shares (ADS) which trade with plenty of liquidity in the United States (1 ADS = 2 ordinary shares). Potential investors will want to note that the company will report earnings on March 4th. (Nancy’s note: the company reported operating profit was £3,161m).
BUY.
Bruce Kaser, Cabot Undervalued Stocks Advisor, cabotwealth.com, 978-745-5532, March 3, 2021