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The FTSE 100 index is home to quite a few dividend stocks that are known for paying generous cash dividends to shareholders.
These dividend payments are a proven way to generate long-term passive income.
That said, not every Footsie company pays dividends and some have a more sustainable payout than others.
With that in mind, I am sharing a top FTSE 100 dividend stock that I would like to include in my portfolio as I strive to build a second income stream.
A clear strategy and plenty of ambition
Aviva (LSE:AV.) is one of the UK’s largest insurance, asset and pension companies. The company has approximately 18.7 million customers in the UK, Ireland and Canada.
With its global investments in China, India and Singapore, the group also has exposure to several key international markets.
Aviva’s strategic priorities focus on execution in four key areas: customers, growth, efficiency and sustainability. The latter refers to the group’s stated goal of leading climate action and regenerating communities.
Ultimately, the company’s ambition is to become the number one customer brand for insurance, assets and pensions. It aims to do this by pursuing disciplined and profitable growth.
A solid year of delivery
In March 2023, Aviva’s full-year results showed another 12 months of robust performance.
Most impressive to me was the growth in underlying operating profit, which rose 35% to £2.2 billion. The Life segment in the UK and Ireland contributed particularly to performance, where the pension division benefited from a combination of improved margins and profit growth.
Total life insurance sales were down 7% due to lower bulk annuity volumes. However, in general insurance, gross written premiums rose 8% to £9.7 billion.
Looking forward, the group is confident in its mid-term financial targets, which include £750 million in cost savings over the period 2018-2024.
A selection of upcoming risks
That said, I see a few challenges Aviva will have to overcome going forward.
The most important of these are the ongoing macroeconomic and geopolitical risks, which threaten to undermine the group’s capital and liquidity position.
Continued areas of uncertainty include the war in Ukraine, credit spreads and downgrades, inflation and interest rate movements.
My investment case for Aviva
Nevertheless, the fact that Aviva delivered strong results in a difficult political and economic context tells me that the company’s strategy and diversified business model are doing something right.
In addition, investors have been richly rewarded by Aviva’s ongoing transformation with over £5 billion in capital returns since 2021.
More importantly to me, 2023 looks set to continue that trend with an announced new buyback and an improved dividend policy. I find it reassuring that all of this is backed by a strong capital position.
As such, thanks to the attractive and growing dividend, I’d gladly buy some Aviva shares right away if I had some cash to spare.
After that, I would aim to hold onto them for the next 20-30 years as part of my strategy to build long-term passive income.