I’m targeting £11,363 a year in retirement from £20,000 in Aviva shares!

£20,000 invested in Aviva shares could make me £11,363 in annual retirement income from this FTSE 100 passive income investment gem’s 7% forecast yield!

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Businessman hand flipping wooden block cube from 2024 to 2025 on coins

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Aviva (LSE: AV) shares are down 8% from their 12 November one-year traded high of £6.98. This has pushed the yield on 2024’s 35.7p dividend up to 5.6%, compared to the current 3.1% FTSE 100 average.

It is because yields move in the opposite direction to price if the annual dividend stays the same. But analysts forecast that dividend will be raised.

So, how much could I make from my £20,000 holding in the firm?

Are these forecasts solid?

Aviva has increased its dividends in each of the past three years – from 31p in 2022 to 35.7p in 2024. This generated average annual dividend yields of 7%, 7.7%, and 7.6%.

The engine behind these gains for Aviva – as with any firm — has been earnings growth. And these jumped nearly 30% over the three years.

A risk to them moving forward is any failure to integrate Direct Line optimally. Aviva expects £225m in cost synergies and £500m in capital synergies from the deal completed in July.

However, analysts forecast that the investment and insurance giant’s earnings will grow by a standout 18.4% a year to end-2027.

Do recent results support the view?

The firm’s H1 2025 results published on 14 August saw operating profit up 22% year on year to £1.068bn.

Its Wealth division’s assets under management rose 6% to £209bn, extending its position as the number one UK player. Meanwhile, its General Insurance premiums jumped 7% to £6.29bn, and its Health division’s premiums rose 14% to £1bn.

Aviva now expects an operating profit of £2bn by 2026.

These positive threads carried through into its Q3 trading update of 13 November. General Insurance premiums rose 12% to £10bn, and Wealth net flows increased 7.7%.

The firm added that it is on track to surpass its 2025 £2bn operating profit target early. As such, it has raised its 2025 target to ‘around £2.2bn’.

Positively as well, this includes around £150m from the integration of Direct Line.

How much dividend income can I make?

Based on its projected strong earnings growth analysts expect Aviva’s dividends to rise to 41.5p next year and 44.7p in 2027.

These would generate respective yields of 6.5% and 7% on the current share price.

On that 7% yield, my £20,000 holding in the firm would make me £20,193 in dividends after 10 years. This is also provided that these payouts are reinvested back into the stock.

This is a standard investment practice known as ‘dividend compounding’ – similar to leaving savings to accrue in a bank account.

After 30 years on the same basis, this would rise to £142,330, although I have to remember that 30 years is a long time and dividends can go down as well as up during such a period. This would give a total value to the holding of £162,330 (including my £20,000 initial investment).

And that would pay me £11,363 a year in dividend income that I could use in my retirement.

My investment view

Given its strong earnings growth outlook and forecast rising dividend yield, I will be adding to my holding very soon.

That said, other high-yielding stocks with excellent earnings growth prospects have also caught my eye recently.

Simon Watkins 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.

More on Investing Articles

Content white businesswoman being congratulated by colleagues at her retirement party
Investing Articles

Is the party over for the big FTSE 100 banks?

Harvey Jones wonders if big FTSE 100 banks like Barclays have delivered all the fun they can for now, and…

Read more »

Mindful young woman breathing out with closed eyes, calming down in stressful situation, working on computer in modern kitchen.
Investing Articles

Has the 2026 stock market crash already begun?

Many predictions have been made about a stock market crash this year. But are these early warning signs pointing to…

Read more »

Mature black woman at home texting on her cell phone while sitting on the couch
Investing Articles

How much do I need in a Stocks and Shares ISA to earn a £500 monthly passive income?

Millions of Britons use the Stocks and Shares ISA as a vehicle to build a sizeable portfolio and to eventually…

Read more »

Investor looking at stock graph on a tablet with their finger hovering over the Buy button
Investing Articles

Down 50%! My once-in-a-decade opportunity to buy RELX shares?

Harvey Jones has waited for years for the chance to buy RELX shares at a decent valuation. Well now it's…

Read more »

piggy bank, searching with binoculars
Investing Articles

What next for the NatWest share price after a stunning 2025 performance?

NatWest just ramped up its 2025 dividend and announced a new buyback - but an unimpressed market pushed the share…

Read more »

Bearded man writing on notepad in front of computer
Investing Articles

Here’s how a spare £3,000 in an ISA could generate a passive income of £90, £900 or even £9,000 per year!

Could someone with a few thousands pounds in an ISA end up earning three times that much in passive income…

Read more »

Night Takeoff Of The American Space Shuttle
Growth Shares

£2k invested in this growth share at the start of the year is worth this staggering amount

Jon Smith points out a growth share that has started 2026 very strongly and explains what the outlook could be…

Read more »

Investing Articles

Attention! These are among the most popular UK passive income stocks right now

The list of popular passive income stocks is currently well diversified across stock market sectors, but here are a couple…

Read more »