The Stocks and Shares ISA’s a terrific way to invest in FTSE 100 dividend stocks, because all the income you receive is tax-free.
Not only do reinvested dividends roll up as you go along, but when you start taking money from your ISA, that’s tax-free too. This makes it a really good way to manage tax exposure in retirement and minimise what goes to HMRC.
Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.
There are lots of tempting dividend-paying blue-chips today, notably insurer Aviva (LSE: AV). At times, it’s looked like the complete all-rounder, as the shares have delivered plenty of growth as well.
Top FTSE 100 income stock
The Aviva share price is up more than 77% in the last five years. During that time, the stock’s yielded around 6%-7%. With shareholder payouts reinvested, investors could be sitting on a total return of around 110%.
Although the shares have been a bit choppy over the last 12 months, they’re still up around 7.5%.
There’s a chance the pace of growth will slow. Share price performance can be cyclical, so after a strong run that wouldn’t be surprising.
Analysts seem to be thinking along these lines. The consensus Aviva share price forecast gives a one-year target of 728p. If correct, that’s an increase of just 2.5% on today’s 710p.
The shares are more expensive, with a trailing price-to-earnings ratio of around 26.5. However, the forward P/E is a more modest 15.7, reflecting expectations that earnings will rise.
Can the dividend keep growing?
Aviva has a good track record of increasing shareholder payouts, especially lately. The full-year 2024 dividend was increased by 6.9%, followed by a 10% hike in 2025.
Yet the trailing yield has dipped to around 5.7%, due to that strong share price growth. The forecast yield for 2026 is 5.84%. Somebody who put this year’s entire £20,000 Stocks and Shares ISA into Aviva could therefore anticipate income of around £1,170 over the next 12 months. Which isn’t too shabby. Any growth is on top.
Although I would say that investors need to diversify, and should only put £20k into Aviva if they hold plenty of other shares in their ISA already.
Dividends aren’t guaranteed, so is this one safe? There are some reassuring signs. Aviva generated £1.5bn of cash remittances in the first half of 2026, up 47% year-on-year, while its Solvency II shareholder cover ratio stood at a healthy 176%. Operating profit rose 24% to £1.33bn.
Risks and rewards
Aviva has been integrating its £3.7bn Direct Line buy, which offers growth and synergy opportunities, but also brings execution risk. Insurance earnings can also be hit by unexpectedly high claims, while the shares’ higher valuation leaves less room for disappointment. A stock market crash would hit the £479bn in assets it holds under management.
Aviva’s diversified business is producing strong growth across insurance, wealth and retirement. Management’s targeting 11% annual growth in operating earnings per share between 2025 and 2028.
Aviva’s really got its act together under CEO Amanda Blanc, and I think it’s worth considering today. I would buy it myself but I’m already heavily invested in FTSE 100 financials. But there’s another income stock that really excites me right now…
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Harvey Jones does not hold any positions in the companies mentioned.
This story originally appeared on Motley Fool
