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Aviva (LSE:AV.) shares have been a breath of recent air in my portfolio since I purchased them in late 2023 at 413p apiece. Not solely have they appreciated in worth to 644p, they’ve additionally pumped out beautiful rising dividends.
However I used to be questioning lately what number of Aviva shares it might take to pay for the common month-to-month power invoice. In accordance with EDF Vitality, that is at the moment £147 for a medium-sized family.
Let’s take a better have a look at this FTSE 100 insurance coverage inventory to search out out.
Robust efficiency
After greater than a decade within the wilderness following the monetary disaster, Aviva inventory has burst again into life in recent times. Below CEO Amanda Blanc, the insurer has exited almost all worldwide markets to deal with extra worthwhile companies within the UK, Eire, and Canada.
Importantly, Aviva has pivoted in the direction of wealth administration and normal insurance coverage within the UK — merchandise that require much less money sitting on the steadiness sheet than life insurance coverage. This asset-light technique has been paying dividends, fairly actually.
We’re accelerating our development in capital-light areas, according to our technique, and now count on our enterprise to be over 75% capital-light by the top of 2028. That is excellent news for shareholders, as we ship stronger development and higher returns, utilizing much less capital. The outlook for Aviva has by no means been higher.
CEO Amanda Blanc, Q3 2025
In Q3, normal insurance coverage premiums rose 12% to £10bn, whereas its wealth enterprise secured internet flows of £8.3bn, bringing property to £224bn. Within the UK, there was a 24% bounce in private traces (motor, dwelling, journey insurance coverage, and so forth), which largely mirrored Aviva’s £3.7bn acquisition of Direct Line.
Encouragingly, Direct Line’s £100m cost-cutting plan was completed three months early, and Aviva is now focusing on £225m of further synergies by 2028. The mixed companies kinds the UK’s largest motor and residential insurer.
Passive revenue plan
Turning to revenue, the newest 12-month forecast places Aviva’s forward-looking dividend yield at a really respectable 6.4%. This represents a FY25 closing dividend in Could and a FY26 interim dividend anticipated round October.
So, to earn £147 per 30 days — the equal of £1,764 per 12 months — to pay for an power invoice, an investor would want to unfold these two funds out throughout the 12 months. The shares would value round £27,000 at as we speak’s market worth.
Naturally, that’s an unaffordable sum for most individuals. Nonetheless, it’s attainable to construct in the direction of it by investing, say, £600 per 30 days in Aviva shares.
On this state of affairs, it might take slightly below three and a half years to build up sufficient shares to pay £1,764 in annual dividends. This assumes payouts are reinvested throughout this era reasonably than spent.
Sadly, UK power payments will most likely be increased in three years’ time, however hopefully Aviva’s dividend will rise to offset that.
For simplicity’s sake, I’ve additionally assumed a secure share worth throughout this era, which is unlikely (ideally, it is going to rise).
Diversification
No inventory is risk-free, in fact, and Aviva may underperform if the UK economic system hits the rocks over the following couple of years. This would possibly see customers cancel sure insurance coverage insurance policies.
Additionally, it might be finest to not put all eggs in a single Aviva-shaped basket. However as a part of a diversified high-yield ISA portfolio, I feel this FTSE 100 inventory is effectively price contemplating as we speak.
