Aviva (LSE: AV.) shares have fallen amid the recent stock market volatility, As a result, the insurer’s prospective dividend yield has risen to an eye-catching 6.6%.
Is there an opportunity to consider here for income investors? Let’s take a look at the set-up.
A solid performance in 2025
Aviva’s recent full-year results for 2025, posted on 5 March, showed that the company is performing pretty well at the moment.
For the year, group adjusted profit was £2.2bn, up from £1.8bn in 2024. Meanwhile, operating earnings per share were 56p, up from 48p.
On the back of this solid performance, the company increased its full-year dividend to 39.3p per share from 35.7p (a 10% increase). It also announced a £350m share buyback.
It’s worth noting that the 2025 results weren’t perfect. An issue worth pointing out is that the company’s Solvency II ratio fell to 180% from 203%.
This ratio is essentially a financial health check for large insurers so a dip isn’t ideal. It probably explains why the share price fell on the day of the results.
One big positive from the 2025 results, however, was future guidance. Looking ahead, the company is targeting 11% annualised growth in operating earnings per share between 2025 and 2028, and planning to increase its dividend (analysts expect a payout of 41.5p per share for 2026).
So, the company clearly expects the momentum to continue. This is good news for current shareholders and potential investors.
What could go wrong for investors?
So, we have a blue-chip company that’s performing well and paying out big, growing dividends – that’s a good place to start as an income investor. But what are the risks with this Footsie stock?
Well, one is financial market volatility. If stock markets head lower (which they could do given all the economic uncertainty), I’d expect the Aviva share price to move lower too (potentially offsetting any dividend income received).
Today, the company generates a decent chunk of its earnings from investment assets under management (AUM). Lower stock markets will translate to lower AUM.
Note that at present, the company has a forward-looking price-to-earnings (P/E) ratio of about 11. That’s not high, but we’ve seen Aviva shares trade at lower valuations in the recent past.
Another potential risk is AI disruption. If self-driving cars and robotaxis go mainstream in the years ahead, it could dramatically lower demand for personal car insurance (a large part of Aviva’s business).
AI could also put pressure on profit margins in the future. If consumers start using AI agents to find the cheapest insurance policies in the market, companies like Aviva (which typically rely on an element of consumer complacency) may have to lower their prices to remain competitive.
My view
Weighing everything up, I think Aviva shares have appeal today. In my view, they’re worth considering for a portfolio.
But there are some risks. So, investors should think about diversification and consider other dividend stocks too.
