FTSE 100 shares may have been tumbling in recent days, but that’s good news for investors seeking a second income. Because when share prices dip, dividend yields rise, all else being equal.
Let’s take a a FTSE 100 share that has pulled back sharply and is now offering a very attractive dividend yield.
Insurance stock
The share is Aviva (LSE:AV.), which has fallen almost 11% inside two weeks. Now at 614p, the insurance giant is offering a 12-month forecast yield of 6.8%. That towers above the current 3.1% FTSE 100 yield.
The reason I highlight Aviva is because the company is performing tremendously. Last year, general insurance premiums rose 18% as operating profit jumped 25% to £2.2bn.
This included a £174m contribution from Direct Line, an acquisition that helped deliver its original £2bn profit target one year early. Aviva ended 2025 with over 25m customers in the UK, Ireland, and Canada, with more than 7m holding more than one policy.
The obvious question here is how long this stellar growth can continue. After all, these are mature and highly competitive markets it’s operating in. And if the Iran war sends inflation surging, this could bring Aviva’s impressive customer growth to a shuddering halt.
These are genuine concerns. Higher living costs are literally the last thing inflation-weary consumers need right now.
However, it’s worth noting that CEO Amanda Blanc says Aviva is “well positioned to win over the long-term capturing growth opportunities across our businesses“.
One area is in wealth, where assets under management grew 18% to £234bn last year. Aviva now has 5.7m wealth customers, and management sees this as an area ripe for further growth over the long term.
Underappreciated AI benecificary
The insurer is also benefitting from AI, having already used the technology to save nearly £100m in general insurance claims. But it’s testing an AI voice-enabled agent that will allow Aviva to handle simple claims from start to finish without human support.
With its huge data sets and a new partnership with ChatGPT maker OpenAI, Aviva looks perfectly positioned to use AI to become more profitable. Around 68% of group operating profit today already comes from capital-light businesses.
Finally, the stock looks good value trading at less than 10 times next year’s forecast earnings. While dividends are never ultimately guaranteed, I’m confident in Aviva’s prospects.
We are highly committed to growing our dividend…We have clear strengths in artificial intelligence which are creating major opportunities to transform claims, underwriting and customer experience.
CEO Amanda Blanc
Pound-cost averaging
Aviva’s forecast yield of 6.8% means someone could buy £15,000 worth of shares today to aim for £1,000 in annual dividends. Because this would be inside the £20k ISA allowance, the income would be tax-free.
Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.
But hang on a minute, I can imagine some people thinking. Fifteen grand is a lot of money to spare, especially when inflation is expected to come roaring back.
Well, an alternative could be to build up this position over time. For example, someone could invest £210 every month and reach that target in just over five years through reinvesting dividends.
For simplicity’s sake, I’ve assumed a stable share price. In practice, it will fluctuate. But by investing regularly, the ups and downs would smooth out, making a £1,000 passive income target very achievable.
