Stocks & Shares ISA season is almost over. With barely two weeks left to use this year’s allowance, the clock is ticking.
Markets have turned shaky. UK investors are rattled by the outbreak of war in Iran and worries over the wider economy. The FTSE 100 has wobbled, down 8%, amid soaring oil and gas prices and fresh geopolitical uncertainty.
Market dips can be unsettling. But they don’t always spell disaster for long-term holders. Historically, bouts of volatility have sometimes opened rare windows where quality dividend-paying companies trade at more attractive valuations than usual.
A stock I’ve got my eye on
One standout business that has caught my attention in the recent sell-off is insurance giant Aviva (LSE: AV.).
In its 2025 results, the blue-chip stock hiked the dividend by 10%. Following recent market jitters, the dividend yield is rising and currently stands at 6.2%.
But this is a consistent dividend payer. As the following chart shows, over the past five years, dividends per share have risen at a compound annual growth rate (CAGR) of 15.5%. This has been fuelled by a rise in profit. In 2025, operating profit surged 25% to £2.2bn.
Chart created by author
Can it keep growing?
Aviva isn’t resting on its 2025 performance. Management has already set new three-year targets.
These include 11% CAGR in operating EPS through 2028, an IFRS return on equity above 20%, and cumulative cash remittances of over £7bn between 2026 and 2028.
The group continues to benefit from its diversified, capital-light model. In fact, 68% of operating profit now comes from these areas.
Driving the acceleration of this model is the buyout of Direct Line. This gives the insurer a foothold in the low-cost price segment through Churchill and on key price comparison websites.
In addition, the breakdown recovery service Green Flag — integrated with Aviva’s in-house car repair service Solus — offers opportunities to grow market share and deliver cost efficiencies.
Another area of growth is workplace pensions. As defined contribution schemes have become the norm, the insurer now has a high degree of visibility over future cash flows from regular employee and employer contributions.
Taken together, Aviva’s scale, cash generation, and strategic investments suggest it has the foundations to sustain dividend growth, even if short-term market volatility continues.
Risks to keep in mind
A downturn or recession could put pressure on many UK businesses that Aviva invests in. Rising corporate bond yields would reduce investment returns, which could in turn put pressure on the dividend.
Recent data shows motor and home insurance premiums are trending lower. At the same time, rising energy-driven inflation could squeeze margins, potentially offsetting some of the cost benefits from the Direct Line acquisition.
Final thoughts
Periods of market wobble can be unsettling. That’s why it’s important to focus on businesses with strong moats that can generate reliable cash flows, whatever the economic environment.
No stock is without risk, and no dividend is ever guaranteed. The key is to keep a cool head and look past the short-term noise.
For UK investors willing to research and separate signal from noise, moments like these can highlight opportunities to pick up quality dividend stocks at more attractive yields.
And Aviva isn’t the only FTSE dividend stock I’ve had my eye on recently…
