Tuesday tips round-up: Aviva, Falkland Oil and Gas

The Tempus column in The Times has labelled new-look Aviva as a 'buy' following the insurer's now-completed takeover of Friends Life, saying that the enlarged group is one of the most high-yielding stocks in the life insurance sector.

After each one of the past three chief executive officers at Aviva cut its payout, the company is set to be a dividend stock again given the strength of the cash flow coming from newly-acquired Friends Life and cost savings from the deal, Tempus said. According to Barclays, Aviva could pay a dividend of 29.5p in 2017, putting the shares on a yield of 5.3%.

"The Friends purchase means that there is no longer any question over Aviva’s balance sheet and therefore it should sail through the Solvency II requirements without the necessity to raise fresh capital, helped by the well-timed decision at the end of 2012 to exit America," the paper said.

While the stock has gained 17% so far this year, it has reversed falls seen in December following an initial negative reaction to the Friends deal, and Tempus sees "further to run".

In the context of a bombed-out oil price Falkland Oil and Gas’s (FOG) decision to postpone drilling a second well in the south and east Falkland basin should not surprise. Instead, the company will focus on the promising discovery made at the start of the month at its Zebedee exploration well in the north of that archipelago. The oil exploration outfit holds a 40% interest in that well and moving ahead in the south would have stretched its resources. The company will also have time to fully appraise the prospects for Humpback, its southern find. Yesterday’s numbers for that prospect are promising. That makes the firm an interesting bet on that less proven southern field, while reducing its risk profile and affording greater security of finances.

FOG’s partners in the south, Nobel Energy and Edison International, recently bought out all of Argos Resources’ interest in another prospect located in the north of the islands. Premier Oil is also looking to develop the huge Sea Lion field which is located in the area. Nonetheless, FOG is best avoided, “I am not sure I would be rushing to invest in any of the Falklands players at present,” as the risks still look excessive, writes Tempus.