I’ve banked some profits recently from winning shares and I’m thinking about increasing my passive income. One dividend stock I already own is Aviva (LSE:AV.), the FTSE 100 insurance giant.
Should I buy more Aviva shares for my ISA portfolio? Let’s discuss.
A leaner machine
When I originally looked at Aviva a few years back, I wasn’t convinced about the investment case. The insurer’s various operations weren’t very complementary and a fragmented global footprint made it seem bloated to me.
Aviva also carried uncomfortably high levels of debt. Due to these factors, the stock had unperformed for many years, and the firm rebased its dividend as recently as 2020. That cut didn’t inspire me with much confidence.
However, the group has become a far leaner and higher-performing company in recent years. Under CEO Amanda Blanc, it has:
- Sold off multiple international businesses, including operations in Turkey, Singapore, Poland, and Italy.
- Refocused on core profitable markets the UK, Ireland, and Canada.
- Reduced debt.
- Focused on growing capital-light operations, including wealth, health and general insurance.
- Acquired Direct Line to control over 20% of the UK motor insurance market.
Tempting
Our broad and now expanded range of products, 25m strong customer base, market leading brand, and the rich and extensive data we have, are major competitive advantages which will drive our future growth…Aviva’s long-term prospects are very bright indeed.
Amanda Blanc
Since the major restructuring and rebase, Aviva’s dividend has been moving in the right direction. It has grown at a compound annual rate of 7.3% over the past five years.
According to forecasts, the stock will pay out 44.4p per share for FY27. So 418 shares, which would cost £3,000 today, should generate roughly £185 in dividends next year.
However, it gets better because Aviva’s 2026 interim dividend will be paid in October. So if I bought the stock before it goes ex-dividend on 3 September, I would get that 14p per share payment too.
Adding it all up then, I could expect to get about £244 in passive income from this investment over the next 14 months. Tempting…
What could go wrong?
As mentioned, Aviva cut its dividend back in 2020. I don’t expect that to happen again, as the business is in a far stronger position today, but it can’t be ruled out entirely.
In terms of operational risks, a spike in inflation wouldn’t be ideal. And we’re seeing more extreme weather, from wildfires to flooding, while Canada can be volatile.
Also, gilt yields have topped 5% recently. While that doesn’t worry me from an Aviva perspective, it’s competition for my money, as it’s a virtually guaranteed 5% return (almost matching Aviva’s trailing yield of 5.6%).
My decision
Will I buy more shares? Well, I’m leaning towards it. Aviva’s operating profit jumped 24% in the first half of 2026, and the Direct Line integration is progressing well so far.
Meanwhile, the stock looks quite cheap and further share buybacks are likely in future. So I’m optimistic for some share price growth alongside dividends moving forward.
For investors looking for a high-yield income stock, I think Aviva is well worth digging into.
Should you invest £5,000 in Aviva Plc right now?
When investing expert Mark Rogers and his team have a stock tip, it can pay to listen. After all, the flagship Twelfth Magpie Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.
And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Aviva Plc made the list?
Ben McPoland owns shares in Aviva.
This story originally appeared on Motley Fool
