I’d buy 2,941 shares of this FTSE 100 stock for £1,000 a year in passive income

The Aviva share price has had a cracking 12 months. But even after that, its yield still makes it one of my top passive income stocks.

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When I look at the London stock market today, what I see mostly is a potential passive income gold mine.

The Footsie is packed full of companies that generate bags of cash. And, for some reason, the market often has them on much lower valuations than similar US-listed stocks.

Some great high-yield stocks have risen in price over the past year. And that means they’re not such big bargains as they might have been a year ago.

Should you invest £1,000 in Aviva right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Aviva made the list?

See the 6 stocks

But if a stock is only very cheap today, rather than stupidly cheap last year? In my books, that’s still a great reason to consider buying.

Long-term favourite

Today I’m looking at one of my top long-term holdings. It’s the the largest multi-line insurance company in the UK, Aviva (LSE: AV.).

And just look at the chart below to see how the stock has come back in the past 12 months.

Created with Highcharts 11.4.3Aviva Plc PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.co.uk

Even after that ride though, the forecast dividend yield is still up at 6.8%.

Even if the share price doesn’t gain another penny, that dividend alone should be enough to come close to the UK stock market’s long-term annual returns.

Now, that does bring up the first risk we have to face with an investment like this. Unlike Cash ISA interest, share dividends are not guaranteed.

Should something bad happen, that hoped-for 6.8% yield could evaporate. Remember the financial crash of 2008, and then the pandemic crash of 2020? We won’t forget them in a hurry.

In the clear yet?

Though the financial sector has made leaps and bounds this year, the UK economy is very much not out of the woods. Interest rates are still high, and inflation blipped back up a bit in July to 2.2%.

Aviva is in a volatile, cyclical, business too. So I would absolutely expect ups and downs over the years, more so than the market in general.

But I’ve been following the insurance sector for decades now, and buying and holding shares. To my mind, it’s possibly one of the best businesses to be in for long-term passive income. But investors do need to expect short-term dry spells sometimes.

For anyone with a similar outlook to me, I really think Aviva is worth considering.

How much?

So, we have a 6.8% dividend yield. And I want to pocket £1,000 a year. For that, I’d need a pot of £14,700. On the share price as I’m writing, that’s 2,941 Aviva shares.

I don’t have that many yet, but I’m getting there. And if I keep reinvesting the dividends I get from that fat yield each year into new shares, I don’t think I’ll be far away.

Now, £1,000 per year isn’t a lot. But it’s only one stock in my passive income portfolio. To cope with possible future sector problems, I make diversification a key priority.

And I won’t need that many different stocks earning £1,000 per year to add a tidy little sum to my pension plans.

Like buying £1 for 31p

This seems ridiculous, but we almost never see shares looking this cheap. Yet this Share Advisor pick has a price/book ratio of 0.31. In plain English, this means that investors effectively get in on a business that holds £1 of assets for every 31p they invest!

Of course, this is the stock market where money is always at risk — these valuations can change and there are no guarantees. But some risks are a LOT more interesting than others, and at The Motley Fool we believe this company is amongst them.

What’s more, it currently boasts a stellar dividend yield of around 10%, and right now it’s possible for investors to jump aboard at near-historic lows. Want to get the name for yourself?

See the full investment case

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Alan Oscroft has positions in Aviva Plc. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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