Aviva (LSE:AV.) shares are starting to look highly tempting for many income investors. That’s because if analyst forecasts are correct, the dividend per share could be on track to reach 41.6p by the end of 2026, placing the insurance stock’s forward yield at a tasty-looking 6.73%.
This projected payout is more than double the 3.13% currently being offered by FTSE 100 index funds. And it means anyone who’s trying to replace their salary with passive income will need a much smaller portfolio compared to index investors.
So just how many Aviva shares does someone need to buy to achieve this goal? And is it even a good idea?
Crunching the numbers
The median average salary in the UK is around £32,890 a year. At a 3.13% yield, a passive index fund investor would need to have a massive £1,050,799 portfolio.
But for anyone earning 6.73% from Aviva shares, the required portfolio size drops sharply to £488,707 – less than half. And in terms of the actual number of shares an investor would need to buy, that’s around 79,063.
Obviously, not everyone has the luxury of having almost half a million pounds sitting on the sidelines ready to be invested today. But the good news is, even someone starting from scratch today can eventually build to this chunky six-figure nest egg by consistently investing each month.
So are Aviva shares actually a good long-term investment?
The bull case
Operationally speaking, Aviva’s performance in 2025 was genuinely outstanding. With the business shifting towards a capital-light business model, underlying operating profits jumped 25%, while earnings per share (EPS) charged ahead by 17%.
And with the bottom line expanding by double digits, not only did the company achieve its 2026 targets a year ahead of schedule, but it also marked the fifth consecutive year of strong, profitable business expansion.
What’s more, the business has just outlined new three-year profit targets for 2028 that are even more ambitious, including a target of 20%+ for return on equity, and an 11% average annualised growth rate for EPS.
Not only does this signal strong confidence from management, but double-digit earnings growth also paves the way for even more sustained dividend expansion. In other words, the already impressive dividend yield could get even bigger in the coming years.
What to watch
Even with impressive 2025 results, there’s one major blemish ultimately weighing Aviva shares down – it’s the Solvency II ratio.
As a quick crash course, the Solvency II ratio measures how much capital an insurance firm holds above the regulatory minimum. And in 2025, Aviva’s ratio dropped from 203% to 180%.
Digging a bit deeper, the sudden drop is largely being driven by its Direct Line acquisition, among other factors. So far, integrating Direct Line seems to be going smoothly. And once the firm unlocks all the expected synergies from this deal, the Solvency II ratio should start to recover. But of course, that all boils down to execution risk.
So where does that leave investors today? All things considered, Aviva shares currently present a compelling passive income opportunity, in my opinion. The insurance stock is far from risk-free. But for investors looking for a higher-yielding investment, this business is definitely worth mulling.
