Friday 20 April 2012

Portfolio Buy: Aviva 8 3/4% Cum Irrd Pref (AV.A)

Another day, another trade. This time, nothing fancy - just a middle-of-the road fixed-income security with a yield of 7.7%: Aviva's 8 3/4% Cumulative Irredeemable Preference Share (AV.A).

This purchase continues the 2012 'fixed-income' theme for the portfolio. The choice of security was a bit constrained, as my TD Direct ISA does not seem to want to let me trade in many corporate bonds or PIBS. Still, it is free I suppose (but I may have to find a third, more flexible ISA next year).

There is a similar 'sister' Aviva pref (AV.B) which has a slightly lower coupon, yield and price.

The dividend is paid in two equal installments each year.

I already hold Aviva ordinary shares, which have an even higher dividend yield. However, Aviva is having some major problems at the moment - with three of its senior managers 'leaving'. One issue is the US business, where there may be a problem with EU regulatory capital levels. Unfortunately, when times get hard it is all to easy to trim the dividends - Aviva's done it before. It is less easy to cut the payments to preference share holders.

I was surprised to see that mine appeared to be the second largest trade in this security on the LSE today. Wow! That might be the market telling me that I'm wrong!

[Purchase price: 114p]

I am not a financial advisor and the information provided does not constitute financial advice. You should always do your own research on top of what you learn here to ensure that it's right for your specific circumstances.


  1. Part of the difference between the yields on the AV.B and AV.A is that they pay their dividends at different times - if you own both you'll receive a dividend every three months.

    Personally, I like the GACA and GACB prefs. General Accident is basically a cash shell that lends money to its parent, Aviva plc so it might be harder for them to stop the dividends on these than AV A and B.

  2. Do you still own these?

    Aviva may be trying to redeem at par. See Mark's tweet below.