Aviva disappoints, another big dividend yield bites the dust

Aviva reported to the market this morning numbers that probably came as a bit of a shock.

Shares in Aviva crashed 15pc in early trading on Thursday after the insurer revealed a 44pc cut in its final dividend from 16p to 9p, reducing its total dividend from 26p last year to 19p for 2102 – a drop of 27pc.

Aviva said it had rebased the dividend to give certainty to shareholders and reduce debt, putting the insurer in "a sound position for the future".

Pension funds, fund managers and small investors, who have held the company's shares because of its 7pc dividend yield, were expected to offload the shares on Thursday.

RSA Insurance upset investors last month by lowering its dividend by 33pc. The surprise cut resulted in a 14pc drop in the insurer’s share price in a single day.  

http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/insurance/9914400/Aviva-shares-tumble-as-slashes-dividend.html

Like RSA Insurance, Aviva had been sitting on the attraction for investors of a big dividend yield for some time, but there was always talk of underlying problems, a "value trap" in the making and thus today's reduction in the dividend shouldn't really come as a total surprise. Anyone who shifted their funds out of RSA into Aviva a few weeks ago will have been hit hard by this double whammy.

Direct Line, are the Sid's back?

Back in the 1980's when privatization was all the rage for the Conservative Government, Sid was chosen as the campaign name of the imaginary ordinary bloke in the street who just might be interested in buying into the nationalised industries that were being sold off.  Millions joined in, often selling for a quick profit as they were priced to sell, BT, UK water, and British Gas to name but three (UK Water ad below).

Such IPO's, especially ones where the public are invited to buy are now rare.  Direct Line Insurance is the latest big IPO, which while not owned by the Government, is owned by RBS the bank saved by the taxpayer from going under back in 2008. In effect, the Government does still own 83% of  RBS and it wouldn't be around today if it wasn't for the taxpayer.