The second income potential of Aviva (LSE: AV) stock just gets better and better.
The insurance firm’s share price has been sliding, which means a bigger dividend yield. It’s now as high as 8.16%. The price has dropped so much that the stock is now at a 52-week low which could be an opportunity to pick up the shares while they’re still cheap.
Prospects look good here too. Dividends are forecast to rise for 2024 and 2025 and cover looks reasonable as well. I really think Aviva stock could be the UK’s best 8% yielder and I’d buy more shares in a heartbeat for a second income stream.
Full disclosure: I do have a position already. I’ve been happy to collect the cash dividends from the small amount of shares I hold, but Aviva’s payout looks so good that I’m tempted to buy more. I could even target a £1,169 yearly second income from this stock alone. Let’s look at how.
Firstly, let’s examine those dividend forecasts. These predictions from City analysts will give me some idea of where my investment could be headed, although I’ll point out that they’re often closer to a guess than an estimate.
| 2023 | 2024 | 2025 | |
| Amount | £10,000 | £10,887 | £11,902 |
| Dividend forecast | 8.87% | 9.32% | 9.83% |
| Dividend return | £887 | £1,015 | £1,169 |
Still, the data shows why I’m bullish on Aviva. If I can build my stake to £10,000 – about 2,617 shares – I might be able to expect a yearly second income of £1,169.
Big income stream
But I don’t want this income stream to stop there. I’ve already watched my return rise from £887 to £1,169 in a couple of years (assuming forecasts are accurate), I’d like to see them rise further. If this trajectory continues, I could make serious cash, and the signs are that Aviva is well placed to continue delivering.
The dividend history over the last decade – shown in the graph below – tells a story here. The firm has a strong record of increasing its dividend every year except one, with an average growth rate of 8.2%.
That said, the graph also shows one of the biggest risks here. In 2020 the payment was slashed due to Covid. The virus came from out of nowhere to wreck dividends left, right and centre. These ‘black swan’ events are unpredictable but inevitable, and I must keep this in mind with this investment.
But the things I can predict look like they’re in Aviva’s favour. And just to add, high interest rates should increase revenues in the coming years too. Some of that cash has already been earmarked for share buybacks, which is extra value on top of those dividend payments.
Best 8% yielder?
All in all, I’m optimistic dividend payouts will keep climbing here and I think I’d be hard-pressed to find a more attractive 8%-yielder. I’ll look to increase my position the next time I have spare cash to invest.
