The Aviva (LSE: AV.) share value is staying stubbornly low. So what may shift it?

I can see a number of issues. However I reckon dividends, in the event that they’re paid in keeping with forecasts for the following few years, might be Simply the factor to offer it a serving to hand.

Refocus

Aviva had been a little bit of a disappointment for some years, and the principle cause regarded clear. The corporate was simply too bloated and appeared to lack clear route. That was at a time when opponents have been slimming down and reducing prices.

However Aviva has been by way of the refocus it wanted.

With FY 2023 outcomes, CEO Amanda Blanc stated: “We have made significant progress in 2023. Sales are up, costs are down, and operating profit is 9% higher. Our position as the UK’s leading diversified insurer, with major businesses in Canada and Ireland, is clearly delivering. Today we have raised our total dividend by 8% to 33.4 pence and have now returned more than £9bn in capital and dividends to shareholders over the last three years.”

That appears like a superb consequence. So why is the share value nonetheless decrease than I first paid in 2015?

Pudding, proof

Effectively, sentiment’s weak, and just about everybody within the monetary sector’s beneath fairly some strain.

To enhance that sentiment, I feel traders may have to see the proof of the pudding. And which may imply two or three years of earnings and dividend rises.

Because it occurs, that’s simply what the analysts assume will occur.

The next desk reveals how dealer forecasts see the Aviva price-to-earnings (P/E) ratios and dividend yields (DY) might seem like for the following three years.

Valuation

These shall be good rises within the dividend, if they arrive off. And the P/E would drop accordingly.

However what is an effective P/E for a inventory within the insurance sector? That’s not simple to reply. It may be a cyclical sector, with erratic earnings.

And which means these shares are not often within the high half of the Footsie in P/E phrases. So for me, I just about wholly assume by way of the dividend for this sector.

And a yield of near 9% by 2026 suggests a share value that’s too low.

Yield valuation

What a couple of 6% yield? I’d be pleased with that as a long-term yield. And it will recommend a 2026 P/E of near 13. That might push the share value up above 650p.

I can’t see it getting fairly that prime in three years, thoughts. And we nonetheless have a number of unsure years forward of us. I reckon all the monetary sector might see shaky share costs for at the least one other yr.

Nonetheless, I’m joyful to simply hold taking the dividends. To this point, they’ve greater than made up for the share value falls of the previous 9 years.