Up 115% with a 5.5% yield – are Aviva shares the ultimate FTSE 100 dividend growth machine?

I havenât written aboutÂ Aviva (LSE: AV)Â shares that often for The Motley Fool lately. Truth is, theyâre a bit of a sore point for me.

In early 2023, when topping up a Self-Invested Personal Pension (SIPP) Iâd just populated with a mix of personal and company pensions, I took a good look at Aviva and wondered whether to buy. I also looked at rival FTSE 100 insurer and asset managerÂ Legal & General Group. As I recall, the latter was cheaper, trading on a lower price-to-earnings ratio, and offered a higher yield. So I went with that.

I tend to be a bit of a contrarian, backing out-of-favour stocks rather than chasing big winners in the hope they recover on my watch. Thatâs worked well overall, but not here. While Legal & General shares have continued to idle, Aviva’s powered on.

Two FTSE 100 rivals, only one winner

Over the last 12 months, Aviva’s up almost 38%, and 115% over five years. In dismal contrast, Legal & General shares are up just 6% over one year and flat over five. Clearly, I backed the wrong horse. The only consolation is that Legal & General pays more income, with a trailing dividend yield of 8.7%, but thatâs largely due to its rotten share price performance.

Despite Avivaâs strong run, it still yields a solid 5.44%. That’s way above the FTSE 100 average of 3.25%. It now looks like one of the best all-round stocks on the blue-chip index, delivering both share price growth and solid dividend income.

Yet a few years ago, Aviva was much like Legal & General today, its shares drifting sideways. They ignited after Amanda Blancâs appointment in July 2020. Her mission was to transform Aviva into a capital-light, industry-leading operation and reignite growth. So far, sheâs done a brilliant job.

In full-year 2023, Aviva posted operating profit of Â£1.47bn, up 9% on 2022. That increased 20% to Â£1.77bn in 2024. Yet on 13 November, the shares fell after Aviva said operating profit for 2025 was on course to hit to Â£2.2bn.

That’s still impressive in my book, but markets had hoped for more. Investor expectations had clearly raced ahead of themselves. The stock dropped sharply on the day and is down 6% over the last month. That’s a serious overreaction, in my view.

Although I can’t see why investors are concerned, as the price-to-earnings ratio has jumped to 27.5, way above the FTSE 100 average of around 17. So is Aviva worth considering today? I think so. The forward P/E looks a lot less challenging at 13.4, while the full-year dividend is forecast to hit 5.94%, rising to 6.36% in 2026.

Investors have cooled on Aviva and I suspect its shares might now idle for a while, but at least that means some of the froth’s gone. For investors willing to take a long-term view, I think they’re still well worth considering. As for myself, I’ll stick with Legal & General shares, and hope 2026 is the year they do an Aviva.

The post Up 115% with a 5.5% yield â are Aviva shares the ultimate FTSE 100 dividend growth machine? appeared first on The Motley Fool UK.

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Harvey Jones has positions in Legal & General Group 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.