The FTSE 100 index is home to a good few dividend stocks known for paying generous cash dividends to shareholders.
These dividend payments represent a tried-and-tested way of generating long-term passive income.
That said, not every Footsie firm pays dividends and some have a more sustainable payout than others.
With that in mind, I’m sharing a top FTSE 100 dividend stock that I’d happily snap up for portfolio in my pursuit of building a second income stream.
A clear strategy and plenty of ambition
Aviva (LSE:AV.) is one of the UK’s leading insurance, wealth, and retirement businesses. The company has around 18.7m customers in the UK, Ireland, and Canada.
With its global investments in China, India, and Singapore, the group also has exposure to several key international markets.
Aviva’s strategic priorities focus on execution across four main areas: customers, growth, efficiency, and sustainability. The latter refers to the group’s stated aim to lead on climate action and regenerate communities.
Ultimately, the company’s ambition is to become the go-to customer brand for insurance, wealth, and retirement. It aims to do this by targeting disciplined and profitable growth.
A solid year of delivery
In March 2023, Aviva’s full-year results demonstrated another 12 months of robust performance.
Most impressive to me was the growth in underlying operating profit, which rose 35% to £2.2bn. The UK & Ireland Life segment primarily drove performance, where the retirement division benefited from a combination of improved margins and earnings growth.
Total life sales fell 7% reflecting lower bulk annuity volumes. However, in general insurance, gross written premiums rose 8% to £9.7bn.
Going forward, the group is confident in its medium-term financial targets, which include £750m in cost reduction covering 2018-2024.
A selection of upcoming risks
That said, I see a few challenges that Aviva will have to navigate going forward.
Chief among these are the sustained macroeconomic and geopolitical risks, which threaten to undermine the group’s capital and liquidity position.
Continuing areas of uncertainty include the war in Ukraine, credit spreads and downgrades, inflation, and interest rate movements.
My investment case for Aviva
Nevertheless, the fact that Aviva delivered strong results amid a difficult political and economic backdrop tells me that the company’s strategy and diversified business model is doing something right.
In addition, investors have been handsomely rewarded by Aviva’s ongoing transformation with over £5bn in capital returns since 2021.
More importantly to me, 2023 looks set to continue that trend with a fresh buyback announced alongside an improved dividend policy. I find it reassuring that this is all backed by a strong capital position.
As such, thanks to the attractive and growing dividend, I’d happily snap up some Aviva shares right away if I had some spare cash lying around.
After that, I’d aim hold them for the the next 20-30 years as part of my strategy to build long-term passive income.
