Passive income is money that keeps rolling in with minimal ongoing effort. And for me the simplest way to build this is through dividend‑paying shares.
The best passive‑income stocks share three qualities, in my view: rising earnings, strong and consistent cash flow, and management committed to increasing dividends.
When a company delivers all three, the income stream becomes both reliable and scalable over time. And insurance and investment giant Aviva (LSE: AV) is a good example of precisely this kind of stock.
Rising earnings growth and cash flow?
The powerhouse for any firm’s dividends over time remains sustained earnings growth, which in turn fuels free cash flow.
A risk for Aviva is a downturn in UK consumer and corporate confidence that could slow new business volumes. Another is prolonged pressure on markets, which could reduce fee income.
However, analysts forecast Aviva’s earnings will increase by an average of 14.5% a year to end-2028 at least. This looks conservative to me, given its 2025 results released on 5 March.
They showed operating profit jumping 25% year on year to £2.2bn, underlining the strength of the diversified insurance, wealth and retirement business model. Cash remittances edged up to £2.1bn, demonstrating the group’s ability to turn earnings into dependable, repeatable cash flow.
And management now targets more than £7bn of cash remittances between 2026 and 2028, giving exceptionally strong visibility for future cash flows.
Increasing dividends?
All this augurs well for Aviva’s ongoing targeting of mid-single-digit growth in the cash cost of its dividend.
Over the past five years alone (beginning in 2021), this has seen respective payouts of 22.05p, 31p, 33.4p, 35.7p, and 39.3p last year. These in turn generated average dividend yields in those years of 3.1%, 7%, 7.7%, 7.6%, and 5.7%.
The drop in some yields despite rises in the payout shows that dividend returns change in line with share prices (and payouts).
Looking ahead, analysts forecast continued rises in dividend yields to 6.7% this year, 7.1% next year, and 7.6% in 2028.
How much passive income potential?
So another £20,000 investment in Aviva shares by me could make £22,663 in dividends after 10 years and £174,133 after 30 years.
The figure assumes the projected 7.6% yield as an average, although this could go up or down over the period. It also factors in the dividends being reinvested into the stock to harness the full power of dividend compounding.
By the end of 30 years — the close of the standard long-term investment cycle — the holding’s total value would be £194,133 (including the initial £20,000).
And this would be paying me £14,754 in annual income from dividends alone by that point!
My investment view
Aviva combines rising earnings, strong cash generation and a clear commitment to growing dividends. These are the three key pillars of long‑term passive income, in my experience.
Add in its capital‑light momentum and strengthened balance sheet, and it is exactly the kind of dependable compounder I want more of in my portfolio. That is precisely why I will be buying more of the shares very soon.
For the same reasons, I think it well worth the consideration of other investors looking for major, long-term passive income.
Should you invest £5,000 in Aviva Plc right now?
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Simon Watkins owns shares in Aviva.
This story originally appeared on Motley Fool
