Deutsche Bank remains bullish on Aviva (LON:AV), arguing that the blue-chip insurer has completed the ‘heavy lifting’. The comments come after the FTSE 100 company hiked its growth and dividend targets last week, while pledging to spend $3 billion of excess cash in the next two years.
Aviva’s share price rose in the previous session, adding 0.65 percent to close at 509.77p, marginally outperforming the broader UK market, with the benchmark FTSE 100 index gaining 38.48 points to end the session 0.53 percent higher at 7,338.97 points. The group’s shares have added more than 14 percent to their value this year.
‘Heavy lifting’ completed
Deutsche Bank reiterated its ‘buy’ rating on Aviva yesterday, lifting its price target on the shares from 585p to 600p.
“After years of heavy lifting, there is light at the end of the tunnel,” the broker’s analyst Oliver Steel commented, as quoted by Citywire. “A commitment to repaying at least £900 million of debt next year reduces leverage to near the peer group average – 31% by 2019.”
The analysts further noted that the normalisation of the leverage ratio and improved quality of earnings was in turn “enabling an uplift to the payout ratio to 55-60 percent by the end of the decade, implying 10-percent per annum growth over 2018-2020 from a yield base that is already 0.7% above the sector”.
Other analysts on Aviva
The 19 analysts offering 12-month price targets for Aviva for the Financial Times have a median target of 560.00p on the shares, with a high estimate of 649.00p and a low estimate of 420.00p. As of December 2, the consensus forecast amongst 21 polled investment analysts covering the blue-chip insurer has it that the company will outperform the market.