It’s no secret that Aviva (LSE: AV.) shares have had a great five years, with the stock up nearly 80%. But since the dividend was cut during Covid, its payout has risen at a compound annual growth rate of 15.5%.
Of course, strong share-price growth is welcome. But for a dividend share, I want to know whether the payout is sustainable. And I think Aviva’s dividend could continue its upward trend. Here’s why.
Growing dividend
Today, Aviva’s trailing dividend yield is 5.5%. However, with the business guiding for the cash cost of its dividend to increase by mid-single-digits and the interim dividend raised by 7%, that puts the shares on a forward yield of 5.9%.
When I look at an insurer, I focus on two things. Firstly, what does its cash flow look like? And secondly, does the business have enough underlying growth to keep generating more cash?
That’s important because dividends ultimately have to be funded by cash. An insurer can report a healthy profit without all of that money being immediately available to return to shareholders.
Aviva is guiding for cumulative cash remittances to the group of £7bn through to 2028. If achieved, that would be 19% higher than the £5.9bn generated over the previous three years.
That gives me some confidence that the company has the financial firepower to keep growing its dividend.
Growing business
For me, the real test of whether a company can keep growing its dividend is what’s happening within its individual businesses.
Aviva’s General Insurance operation has performed particularly well. Revenue has grown from £9.7bn in 2022 to £14.1bn in 2025.
Then, in the first half of 2026, UK General Insurance premiums jumped 98%. This was partly due to the addition of Direct Line, but the intermediated business also delivered growth, including through its partnership with Nationwide.
It’s a similar story in Wealth. Assets under management have grown from £147.5bn in 2022 to £261.3bn in H1 2026.
A key driver here has been strong momentum in workplace pension net flows. Regular employer and employee contributions now total £1bn a month, giving it significant visibility over future cash flows.
A thinner capital cushion
The main risk I see is that a serious market shock could put pressure on Aviva’s capital position. Its Solvency II cover ratio was 180% at the end of 2025, down from 203% a year earlier, following the Direct Line acquisition.
That’s still a healthy buffer. But with gilt yields recently hitting their highest levels since 2007, I think it’s worth remembering that insurers can be vulnerable when financial markets come under severe pressure.
If capital did come under significant strain, management might have less flexibility to keep increasing the dividend.
The bottom line
If an investor buys Aviva shares expecting the same share-price growth we’ve seen over the past five years, they could be disappointed. That’s not because I think the shares look expensive, with an adjusted P/E of 12.1.
The dividend is a different story. I’m increasingly of the belief that it’s well supported by the company’s cash generation and earnings, and could continue to offer one of the more generous yields in the FTSE 100. It may be worth considering.
But Aviva is not the only dividend stock that really excites me today…
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Andrew Mackie owns shares in Aviva.
This story originally appeared on Motley Fool
