Image source: Getty Images Aviva (LSE: AV.) shares have been gaining ground since October. But even after a 20% rise in a little over three months, the price is still low enough to keep the forecast dividend yield up at 7%. With such a big dividend, why aren’t investors piling in and pushing the price up further? I see a few reasons, but they look short term to me. One is that Aviva has recorded a couple of years of falling earnings. And forecasts for 2022 suggest a bit of a profit crunch. Full-year results are due on 9 March, and the focus this year seems to be on building up long-term business. Refocus It’s all part of restructuring and refocus. Aviva had its fingers in so many worldwide pies that many investors found it hard to see a joined-up company. But the firm dumped its international business and is now focused on its core insurance markets in the UK, Ireland, and Canada. I think that makes it a more streamlined business for the future, and I very much approve. But it also brings a whole new string of unknowns. The company will have to prove its new model to investors in the coming years. It doesn’t help when those years are starting with an economic crisis, climbing energy costs, soaring inflation, and rising interest rates. That’s really not the happiest set of circumstances for any company operating in the financial sector. New business In its Q3 update in November, Aviva reported a 46% jump in new business value, with improving margins. Business was looking positive across the board. Chief executive Amanda Blanc said: “We are on track to deliver our financial targets and trading momentum is building. Our dividend guidance remains unchanged and, as previously announced, we anticipate commencing additional returns of capital to shareholders with our 2022 full year results“. The size and shape of any new capital returns could give the shares a boost, when the results are out. But I can’t help thinking it might take a bit longer for investors to get fully on board with Aviva’s renewed direction. And we might need to see an easing of global economic distress too. Forecasts Analysts seem to be going along with the company’s guidance for now. Forecasts suggest a couple of years of earnings growth to follow, dropping the stock’s price-to-earnings ratio to under eight by 2024. Over the same timescale, the pundits have the dividend yield growing to 8%. As always, investors should treat forecasts with caution. The brokers making them tend to toe the company line. And they’re often among the last to reflect any downturn in investor sentiment. There are certainly risks ahead. Mainly, I think, they’re the broader economic ones facing financial firms everywhere. And I don’t expect any quick share price profit from Aviva. But I do intend to keep topping up on Aviva from time to time, to lock in a long-term stream of dividends.
