Aviva shares tipped to boom and dividend grow
It’s underperformed rivals and the wider market this year, but one group of City experts predicts a significant bounce. City writer Graeme Evans explains their rationale.
28th May 2026 13:32
by Graeme Evans from interactive investor
The high yield and high income growth opportunity of Aviva shares has been flagged by a City bank after it initiated coverage of the FTSE 100 insurer with an 800p target price.
Berenberg’s projected 28% upside to a potential market valuation of £24 billion extends to 36% when including forecast capital returns in 2026.
- Invest with ii: SIPP Account | Stocks & Shares ISA | See all Investment Accounts
As well as a near double-digit cash yield, it points out that Aviva’s robust and diversified business model puts it in a strong position to steadily grow the dividend.
Berenberg forecasts compound annual growth of 6.5% between 2026 and 2028, with a recurring £350 million buyback on top. This compares with the sector’s consensus average of 5.7%.
It believes Aviva’s high yield is not subject to the typical “trade-off” between yield and growth.
With shares currently at 627p, Berenberg notes that Aviva offers prospective investors an initial total cash yield of 9% out of its 2027 profits. This is in the top quartile for the sector, with the dividend accounting for 7% and the remaining 2% from buybacks.
The bank said: “Within our UK coverage, Aviva is one of the few insurers that delivers both above average sector yield and growth, whereas typically high yields are traded off against lower growth.
“To put that into perspective, the 7% dividend yield (excluding buybacks), at a steady 6.5% annual growth would imply a 50% cumulative cash return after five years and over 100% by the end of the 10th year.”
- Don’t miss the next big IPO: get the latest IPO news and updates straight to your inbox
- FTSE 100 ex-dividend dates: June 2026
- What City thinks of IQE, the best-performing share of 2026
The capital returns are underpinned by nearly £7.1 billion of forecast cumulative cash remittances between 2026-28 and £1.3 billion of liquidity on the balance sheet.
The shares have drifted since setting a near two-decade high of 686p prior to the start of the Iran war and the company’s annual results on 5 March.
The new Direct Line owner posted a 25% jump in operating profit to £2.2 billion, marking a fifth year of strong, profitable growth as Aviva delivered on its 2026 targets a year early.
This month’s payment of 26.2p a share lifted the dividend total for the year by 10% to 39.3p, while Aviva also commenced a £350 million buyback of shares.
In a trading update on 14 May, chief executive Amanda Blanc reported an excellent start to the new financial year and said the company was well placed to meet its group targets and to “deliver even more for our customers and shareholders this year”.
Since joining in 2020, Blanc has overseen a rapid increase in the market share of Aviva’s UK property and casualty business, which now accounts for 38% of operating profit.
From 10% six years ago, the current market share of 17% is almost double that of Admiral Group as the next largest as Aviva builds a widening economic moat around the operation.
Berenberg said: “Aviva’s growing size, product breadth, and comprehensive channel distribution expertise is unmatched in the UK, in our view, and we believe this dominant position is extremely difficult for competitors to replicate.”
The bank adds that Aviva is among the few scale players capturing the growing pool of UK retirement savings assets.
- How to make early retirement a possibility
- Sign up to our free newsletter for investment ideas, latest news and award-winning analysis
- Serious concerns raised about savers raiding retirement pots
Higher net inflows have meant operating leverage benefits, which Berenberg regards as key to delivering 25% operating profit growth in Aviva’s wealth management business to 2028.
It also highlights the dual strategic role that Aviva’s annuity portfolio plays as a significant contributor to its cash pile and for funding future business growth.
Demand for retail and institutional annuity products has boomed since 2023-24 as higher gilt yields and improved pricing have made these products more attractive.
Berenberg said: “By their nature, annuity books provide long-term cash flows that underpin Aviva’s future dividends and secure future growth investments.”
These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.
Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.