Is Aviva’s Dividend (LON: AV) & Share Buyback Helping Price Action?

Aviva share price (LON: AV) has been steadily gaining over the past 12 months, increasing by 26%, largely out of the headlines. In the landscape of the UK stock market, high dividend yields can often catch the eye of investors seeking passive income, and one notable contender grabbing attention is Aviva, the insurance giant listed on the London Stock Exchange (LON: AV).

Aviva boasts a considerable 7% dividend yield which positions the firm amongst the top potential dividend payers within the illustrious ranks of the FTSE 100 Index.

Furthermore, analysts project a bright future for Aviva's financial performance – an anticipated earnings increase of 21% this year alone. This significant growth translates to a tantalizingly low price-to-earnings growth (PEG) ratio of just 0.5, hinting that the stock might be currently undervalued, an enticing prospect for bargain hunters.

Aviva's strategic positioning cannot be overemphasized. The firm is well-established with a powerful brand identity, active operations within rapidly expanding markets, and notable cash generation capabilities. This strong cash position bodes well for continued investments, possible acquisitions, consistent dividend payments, and even the chance for share buybacks – all of which can be considered music to the ears of shareholders. Back in March, the firm did announce a buyback of £300 million on the back of rising profits, a factor which both boosts demand and sentiment in the stock, and also takes some of the float off the market, thus reducing supply.

These factors when combined together with steady dividends can cause a steady increase in price-action, as supported by the multi-year highs that the stock currently trades around.

Despite the undoubted opportunities, inherent risks do exist. The insurance sector is particularly susceptible to economic fluctuations and the unpredictable nature of climate change, which could see a rise in claim costs. Nevertheless, the consensus among market watchers is that the advantages of owning shares in Aviva – especially considering the potential for long-term income – outweigh any potential downsides.

Looking ahead, City analysts carry a buoyant outlook, implying that Aviva's dividends might not just be sustainable but could actually exhibit an upward trajectory in subsequent years.

The resilient investor sentiment is further reinforced by current shareholders, including financial commentators who echo a positive stance. Analyst targets above highlight further potential expected increases in Aviva shares. There are always shifts in sentiment, but at the moment, the bulls seem to be firmly in charge here.