Aviva (LSE:AV.) shares are currently throwing off one of the juiciest payouts in the entire FTSE 100, with a total dividend yield of around 6.3%. That’s despite the stock climbing almost 60% over the last five years, rewarding patient shareholders with both income and capital growth.
So is this now a no-brainer buy for my portfolio? And could I potentially unlock a lifetime of passive income?
What’s powering the 6.3% yield?
The headline yield isn’t an accounting trick. It’s being fuelled by genuinely strong earnings.
In 2025, Aviva delivered its fifth consecutive year of “strong, profitable growth”. Operating profit jumped 25% to £2,203m, operating earnings per share rose 17% to 56p, and return on equity hit an impeccable 17.5%.
That kind of performance is exactly what you want underpinning a high yield. And shareholders have felt it directly. The total dividend per share was increased by 10% to 39.3p for 2025.
Digging deeper, a big part of this momentum comes from Aviva’s core engines. General insurance premiums grew 18% to £14.1bn, with strong profitability across the UK, Ireland and Canada. Meanwhile, its wealth arm attracted record net inflows of almost £11bn, helping push assets under management to over £230bn.
Then there’s the pension risk transfer (PRT) market. In simple terms, this is where corporate pension schemes pay insurers like Aviva to take over their long-term liabilities, swapping uncertain obligations for a fixed insurance contract.
The UK PRT market is expected to reach about £70bn of deals in 2026 alone, and consultants flag Aviva as one of the key players. That’s a huge, long-duration profit pool if the company can capitalise on it correctly.
So why then are institutional investors seemingly growing cautious?
Where’s the risk?
On the surface, this all sounds like an income investor’s dream. But big institutions are not treating Aviva as a slam-dunk.
One obvious concern is the Direct Line deal. Aviva’s in the process of integrating the motor and home insurer following its £3.7bn acquisition. Analysts at Jefferies have described the deal as financially compelling but warned about the massive integration risks that come with deals of this size.
What’s more, beyond stiff competition, there’s also the basic fact that Aviva is becoming more exposed to the insurance cycle.
That means more sensitivity to claims inflation, severe weather, and regulatory pressure. And while the PRT market’s booming, it also creates long-duration liabilities for the business – a significant risk if investment returns or credit markets start to misbehave.
Is this still an opportunity?
As I see it, Aviva’s delivering exactly what income investors want to see: rising profits, strong cash generation, and a well-covered and growing dividend.
Management’s already hit its 2026 financial targets a year early and is now guiding for 11% annual EPS growth and a return on equity above 20% by 2028.
Yes, the Direct Line deal and a heavier tilt toward general insurance raise the risk profile. But they also expand Aviva’s scale and earnings power if integration is executed well.
Combine that with a 6.3% yield that’s backed by real cash, and I think there’s a strong case that Aviva shares could form the backbone of a long-term passive income strategy. That’s why I’m already considering the business for my own income portfolio.
Should you invest £5,000 in Aviva Plc right now?
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Zaven Boyrazian does not hold any positions in the companies mentioned.
