7.6% dividend yield! Is Aviva’s share price the greatest FTSE 100 bargain?

My favorite thing about owning a stock in a FTSE 100 Dividend stocks are consistent returns, even in bad years for the stock market.

During the 2022 turmoil, I am happy to still receive regular payments to my brokerage account from the shares I own in these types of companies.

Among British companies, one of the highest dividend payers is Aviva (LSE: AV). The company has paid out more than £1bn to shareholders in the past few years.

I do not have a position in the insurance giant FTSE 100. But as 2023 looks like another difficult year for the market, I see several reasons why this could be the biggest deal in the FTSE 100.

A sufficient yield

Aviva’s annual yield is currently at 7.63%. Over a year, I would expect that the percentage on a share of £1,000 to give me £76.30 and a share of £10,000 to give me £763 and so on.

I would be very happy with that type of payment, but they are so big that there is also the risk that the future payment will decrease or be inconsistent.

The first step you can take to assess this risk is to look at past performance and future projections. Over the past five years, Aviva has paid dividends of 7.1%, 10.9%, 3%, 10.5% and 7.1%.

This is a very good number and is usually in the 7.63% range. Even 3% came in 2020 due to the COVID pandemic, which should be the only thing and not a sign of future drops.

Towards the future

Looking ahead, Aviva’s dividend for next year is projected to rise from 31p per share to 32.5p. The percentage will vary, but at the current share price that will come in at 7.9%.

It’s nice that past and future dividends look strong, but I can be sure that future dividends will stay that way if I look at how the company spends.

As a general rule, if more than 60% of the company’s earnings go to shareholders, it is a bad sign. Spending too much on dividends can mean less cash for the company to grow its business. And if the payment is too high, it may not be sustainable and will decrease in the future.

Aviva is spending about 53% of its earnings on dividend payments in 2022. Based on that, I believe there is no short-term threat to the dividend.

I bought it?

Of course, I can’t just quickly analyze a company in terms of dividends.

In the case of Aviva, I like that the company has a global reach in countries like Ireland and Canada so it doesn’t rely on UK income. But I worry that insurance is a saturated market, which could prevent further growth.

Analyzing these things is important to make sure I’m buying from a good company. And if I do it right, I can expect to see the stocks I own go up in value, which will give me a return on my investment.

Overall, Aviva looks very strong to me. I believe a return of almost 8% and a strong dividend history make it one of the best deals the FTSE 100 has to offer today. I will look to open a position in the near future.