The FTSE 100 business accounted for 4.13% of all buy orders with Hargreaves Lansdown customers in the last seven days. This put it third on the list of the most popular stocks.

Should I buy the life insurance company for my own portfolio? Here I’ll drill down into why I would (or wouldn’t) invest in this UK share today.

All-round value

The Aviva share price has slumped by a quarter in 2022 to current levels. As a value investor this descent makes it a share I’m paying close attention to.

You see the business trades right now on a forward price-to-earnings (P/E) ratio of 9 times. In addition to this, its dividend yield for 2022 sits above 7.5%.

Speaking of dividends, the predicted payout of 31.1p per share for this year isn’t that well covered by predicted earnings of 45.4p. But Aviva’s cash-rich balance sheet should give it the ability to meet City estimates.

Cash machine

As a matter of fact, its financial strength is one of the reasons I’m considering buying the company.

Its Solvency II Capital Ratio jumped to an impressive 213% as of June. This is more than twice the regulatory requirement and was driven by solid cash generation and positive market movements.

Not only is this predicted to drive more market-beating dividends. Aviva’s excellent liquidity has raised the prospect of additional share buybacks too, providing a boost to earnings per share.

Chief executive Amanda Blanc announced in August that “we are increasingly confident in Aviva’s prospects and anticipate commencing additional returns of capital to shareholders with our 2022 full-year results.”

A top stock I‘d buy

The balance sheet has benefited from huge asset sales in recent years. In fact the sale of its operations outside the UK, Ireland and Canada boosted the balance sheet by £7.5bn.

I’m aware of how the sale of its overseas divisions could endanger future profits and dividend growth. A reduced geographic footprint gives it fewer customers to aim for.

However, I still expect Aviva’s earnings to grow strongly over time.

Firstly, the business has terrific structural opportunities as populations in its markets age. The Office for National Statistics expects the number of over-65s in Britain to rise 50% between 2016 and 2035. This could turbocharge demand for Aviva’s retirement products and other financial services.

The company can also use its considerable balance sheet to acquire assets that boost profits. Blanc commented in August that “surplus capital above [our] target level of 180% is available for investment in the business and tactical bolt-on M&A to drive further growth.”

At current prices I think Aviva could be too cheap to miss. It’s a top stock on my shopping list today.

Is now the time to buy the FTSE 100 stock for my portfolio? Let’s discuss.

Why did Aviva’s share price fall?

First, let’s look at why the Aviva share price has dipped. The main reason (ignoring general market weakness) is that the recent spike in gilt yields has spooked investors.

Given that Aviva is active in the LDI (liability driven investment) space, it most likely needed to stump up capital to meet margin calls on gilt derivative positions when gilt yields surged. I wrote about this issue when I covered Legal & General shares earlier in the week.

Now I don’t think there’s anything to worry about here. There are a couple of reasons I say this. The first is that Legal & General has come out and said it comfortably handled the surge in gilt yields. So I’d expect it to be a similar situation with Aviva.

The second is that on 30 September, three top-level insiders at Aviva, including CEO Amanda Blanc, purchased shares in the company. In total, these insiders bought around £600k worth of stock. I don’t think they would have done this if the company was in financial trouble.

So I don’t think investors need to be too concerned about this issue.

The new Aviva

Moving on from this, Aviva appears to be in good shape right now. Recently, it has streamlined its business. It’s now focused predominantly on the UK, Ireland, and Canada. This transformation appears to be paying off. In the first half of 2022, operating profit came in at £829m, up 14% year on year.

Meanwhile, the stock’s valuation seems quite reasonable. At present, analysts expect Aviva to generate earnings per share of 42.9p this year. At the current share price, that equates to a P/E ratio of just nine.

Big dividend

Of course, I can’t talk about Aviva and not mention the big dividend. In recent years, Aviva has been a cash cow. In its recent H1 results, the company said that it expects to pay out around 31p per share for the full year. This means there’s a yield of around 7.7% on offer here right now.

The company also mentioned in its H1 results that it’s planning a share buyback in the near future. “We are increasingly confident in Aviva’s prospects and anticipate commencing additional returns of capital to shareholders with our 2022 full year results,” said Blanc. This could boost earnings per share.

My move now

One issue here for me however, is that Aviva has been a very inconsistent performer in the past. This is illustrated by both its share price and its dividend track record. The former has gone nowhere since 2008 while the latter has been very up and down.

This is a bit of a turn-off for me. These days, I like to invest in companies that have excellent long-term track records when it comes to generating shareholder wealth.

In light of this issue, I’m going to leave Aviva shares on my watchlist for now. I need to see that the company can consistently perform well before I invest in it.

This figure beats the 4% FTSE 100 forward average by a huge distance. And the margin gets even bigger for next year. In 2023 the yield jumps to 8.2%.

Aviva’s share price has dived as worries over the global economy have grown. But should I buy this high-dividend share on account of those massive dividend yields?

And could it be a contender for excellent long-term dividend growth?

Dividend growth

Like many UK stocks, Aviva was forced to slash the payout at the height of the pandemic. In 2019 it hacked the full-year amount down to 15.5p per share from 30p the previous year.

Pleasingly the insurer has raised annual payments for the last two years since then. And it has plans to hike them by a massive 40% in 2022 to 31.5p per share.

City analysts expect Aviva to make good on this promise, as well as its intention to hike the yearly payout to 33p in 2023.

Cash machine

Thanks to its epic cash position I think the company will be able to meet these dividend forecasts.

Usually dividend cover of below 2 times is a warning sign for investors. It suggests a weak margin of safety if earnings disappoint. Notably Aviva’s projected dividends are covered between 1.4 times and 1.7 times over the next few years.

But this isn’t something I think the firm’s investors need to worry about. Massive restructuring has given its balance sheet an enormous boost, with sales of overseas non-core assets giving it a £7.5bn injection and cost savings also impressing.

In fact, in March Aviva upped its cost-cutting target following recent improvements. It’s now targeting savings of £750m excluding inflation between 2018 and 2024.

A strong balance sheet is giving the slimmed-down business scope to hike dividends and embark on share buybacks. Its Solvency II ratio leapt to 213% as of June, more than twice the regulatory requirement.

A red-hot value stock

There’s no doubt activist investor Cevian Capital is helping to drive Aviva’s ultra-progressive dividend policy. Its calls for bigger shareholder payouts included a demand last year for the company to return £5bn to shareholders after asset sales.

I think Aviva will generate large enough profits and cash to pay big dividends over the long term too.

In theory the company’s decision to sell its overseas units and concentrate on the UK, Ireland and Canada could limit its earnings prospects. But it’s my opinion that certain demographic changes (like rapidly ageing Western populations) and Aviva’s exceptional brand strength should still deliver solid revenues growth over the long haul.

One final thing: right now Aviva trades on a rock-bottom P/E ratio of 8.8 times for 2022. This makes it one of the best cheap dividend stocks to buy, in my opinion, and one I’m considering for my portfolio.

And today, I’m looking at two passive income stocks that are currently trading at discounts after the recent stock market correction. While my portfolio has decreased in value since Liz Truss came into office — more than $500bn have been wiped off UK stocks — I also see this as an opportunity to buy more of the stocks I believe in.

So, here are two passive income stocks I’m buying more of after the stock market correction.

Hargreaves Lansdown

Hargreaves Lansdown (LSE:HL) shares have taken a battering recently, and there are some concerns it could get worse as clients prioritise paying bill rather than investing. The company announces interim numbers on 19 October. 

However, I’m optimistic that people will want to have their cash working hard amid rampant inflation. In the first half of the year, the firm demonstrated impressive capacity to continue growing despite a tough operating environment.

When other financial services companies saw net outflows of customers and cash, Hargreaves Lansdown didn’t. The firm recorded £5.5bn of net new business, alongside a 92,000 increase in active clients and revenue of £583m during H1.

The pace of growth has slowed since the pandemic, but that’s understandable as we’re not all locked in our homes for days on end. As many as 1 in 10 people started investing during the pandemic.

Looking at the long run, for me, Hargreaves stands to benefit as more and more investors look to take charge of their investments. And this is why I’m buying more shares as the stock falls to around 850p. The firm is down 38% over the past year and now has a tasty 4.8% dividend yield.

Aviva

Aviva (LSE:AV) shares are down 12% over the past week — confidence in the new government’s mini-budget clearly isn’t high. But the stock is fairly flat, up 2%, over the course of the past year.

In August, Aviva said it had witnessed “continuing momentum” in the six months to 30 June. The firm reported growth in both operating profits and own funds generation during the first half.

And there is cause for future positivity. RBC recently lifted its price target on Aviva to 510p from 420p, citing strong capital generation and a positive reinvestment strategy.

The business is also much leaner than it used to be just a few years ago. Aviva, under Amanda Blanc, made £7.5bn by selling off eight non-core businesses, including those in France and Italy. The group now focuses on core markets in the UK — where it serves some 18 million customers — Ireland, and Canada. 

I do have some concerns about the impact of the mini-budget on the UK economy and therefore insurers, but Blanc was among those calling for reform of the financial sector — after all, she knows her business better than me.

Aviva has always had an attractive dividend yield, but right now it stands at 7.8%. And that’s very attractive to me.

Aviva

Aviva (LSE: AV) is a British multinational insurance company. It has millions of customers across its core markets. Aviva is also the UK’s largest general insurer. This week, a non-executive director purchased shares using a proportion of their net director fees.

The insurance giant has suffered a rather tumultuous week, dropping more than 10%. This is due to fears that the company’s pensions and investment management divisions could suffer greatly from the sell-off in gilts. That being said, the purchase from non-executive director Pippa Lambert could hint that insiders don’t think the overall market reaction this week will affect Aviva in the long term.

• Name: Pippa Lambert
• Position of director: Non-Executive Director
• Nature of transaction: Share Purchase Scheme (Partnership Shares)
• Date of transaction: 27 September 2022
• Amount bought: 1,288 @ £4.19
• Total value: £5,393.40

Kingfisher

Kingfisher (LSE: KGF) is an international home improvement company. The firm has over 1,500 stores and numerous household brands under its group. These include the likes of B&Q, ScrewFix, and TradePoint.

The FTSE 100 company reported that its CCO sold a rather substantial number of shares earlier this week. That being said, it’s worth noting that these shares were, in fact, sold on 21 September 2022. Still, the director dealing doesn’t help shore up investor confidence after Kingfisher posted earnings that saw profits slump by 30% on an annual basis.

• Name: Sebastien Krysiak
• Position of director: Chief Commercial Officer
• Nature of transaction: Sale of shares
• Date of transaction: 21 September 2022
• Amount sold: 20,132 @ £2.35
• Total value: £47,346.44

DS Smith

DS Smith (LSE: SMDS) is a multinational packaging business. It manufactures sustainable corrugated case materials and specialty papers. In addition to that, it also provides recycling and waste management services along with plastic packaging that is reusable and recyclable.

This week, a couple of huge director dealings were reported by the FTSE packaging company. Among this, a group finance director as well as a non-executive director opted to buy and sell shares in large volumes. It’s worth noting that the following transactions occurred in the previous week and were only reported this week.

• Name: Adrian Ross Thomas Marsh
• Position of director: Group Finance Director
• Nature of transaction: Deferred Share Bonus Plan
• Date of transaction: 23 September 2022
• Amount vested: 79,617 @ Nil
• Total value: N/A

• Name: Adrian Ross Thomas Marsh
• Position of director: Group Finance Director
• Nature of transaction: Sale of shares
• Date of transaction: 23 September 2022
• Amount sold: 38,493 @ £2.64
• Total value: £101,429.06

• Name: Alan Johnson
• Position of director: Non-Executive Director
• Nature of transaction: Purchase of shares
• Date of transaction: 23 September 2022
• Amount sold: 12,596 @ £2.62
• Total value: £32,999.84

Types of shares

To provide context, there are a few types of shares that can be purchased by directors. Some directors opt to purchase shares via the open market. Having said that, directors also have the option to purchase and receive shares via a share incentive plan (SIP).

A SIP is an employee plan for companies within the UK to flexibly award shares to employees. Publicly listed companies normally exercise this option because it’s tax-efficient for both the employer and its employees.

On this occasion of FTSE director dealings, Aviva’s Lambert purchased over a thousand Aviva shares using a proportion of her net director fees. Evidently, this is paid on a quarterly basis with the goal of acquiring Aviva shares on a continuing basis.

Meanwhile, the Kingfisher CCO opted to sell his shares after a dismal report from the company last week. DS Smith’s Group Finance Director also opted to follow in his footsteps by selling a number of his shares. This comes following the director’s decision to exercise the option to redeem almost 80,000 shares that were granted on 15 July 2019 under the company’s Deferred Share Bonus Plan. He subsequently sold approximately 38,000 of those shares. Having said that, the sale of shares conducted were for tax purposes, rather than a decline in confidence. On the other hand, Johnson decided to purchase DS Smith shares direct from his pocket.

Noting the share price tumble

As far as I can tell, there’s no specific reason today for the move lower. However, the moves in the market so far this week are a negative for the business.

UK assets in general are being sold aggressively. The British pound has fallen to its lowest level against the US dollar since 1985. Government bonds have dropped so sharply that the Bank of England had to issue a statement today saying that it would buy an unlimited amount of bonds in order to support the market.

Even though I think of Aviva as being a large player in the insurance market, it has divisions in pensions and investment management. The performance of these departments is likely going to be poor, given the sell-off in asset prices. It could lead to investors pulling their money out of Aviva funds. This would lower revenue, as the firm earns money based on the size of the assets under management.

Not a rational move

The above is the thought process that I think some Aviva shareholders had today as they sold their holdings. Yet it should be noted that the company hasn’t come out with any trading update to confirm any concerns.

If anything, I think the market is overreacting. Aviva has a diversified range of revenue streams, some of which (such as insurance), shouldn’t be badly impacted by the events over the past week. If the Bank of England restores some form of balance to the currency and bond markets in coming weeks, I think the panic should be over.

If I’m correct in this regard, it speaks to why now could be a good time for me to buy Aviva shares for income. After all, if company performance isn’t going to be materially impacted, profits should ensure the dividend payout remains the same.

Buying Aviva shares for income

Assuming the dividend per share stays the same, a lower share price helps me to increase my purchasing power. After all, the dividend yield calculation is just the annual dividend per share figure divided by the current share price. Granted, the share price moves every second. But that’s why buying on a day when the stock is down 8.5% makes sense to me.

The main risk I see is if the share price continues to fall after I’ve purchased. Even with a high yield above 7%, I could face a loss on my investment if the share price moves lower in coming months. To try and solve for this, I want to invest money that I feel I won’t be needing within the next year at least. This should reduce the chance of me needing to sell the stock prematurely for cash at a loss.

I’m pretty sure that I’ll buy Aviva shares in coming days.

After the IMF sternly criticised new chancellor Kwasi Kwarteng’s tax-slashing actions, a number of top FTSE 100 shares have suffered. These three are among the biggest fallers.

Insurance slump

The Aviva (LSE: AV) share price fell 7.2% Wednesday morning, and it’s down nearly 30% over the past 12 months. The forecast Aviva dividend yield has hit 7%, as the insurer’s turnaround is coming good.

Forecasts may change in the coming weeks, depending on how the current economic tornado settles.

But analysts currently have a couple of years of solid earnings growth pencilled in, which would drop the Aviva price-to-earnings (P/E) ratio down to under seven by 2024.

Aviva’s first-half results were summed up by chief executive Amanda Blanc: “Sales are up, operating profit is higher, our financial position is stronger. This has been an excellent six months for Aviva.”

The second half could well see Aviva taking a hit, especially if the Bank of England (BoE) needs to hike interest rates a lot higher to cope with Kwarteng’s unique take on what’s best for the country. But for the long term, I see a quality company at an attractive price.

Recovery setback

Rolls-Royce Holdings (LSE: RR) is one of the most-watched stocks on the FTSE 100 at the moment. And Wednesday’s market pummelling took it down a further 6.5% in morning trading.

The issues facing Rolls-Royce are widely known. It needs the aviation industry to get back to some sort of strength so that it can get its engine maintenance revenue streams flowing again.

The plunging pound, with the adverse effects that has on living costs, could seriously hamper the BoE’s efforts to control inflation. And that’s unlikely to get people flying. So what little recovery investors were hoping for in the second half of the year might well be frustrated now.

But I don’t think this past week’s events should make a lot of difference to the long-term prospects for Rolls-Royce. There’s too much underlying uncertainty for me. But those who rate the stock a ‘buy’ might see a better opportunity now.

More insurance

Legal & General (LSE: LGEN) is another of my favourite financial services stocks. It’s fallen 8.5% on the day, as I write, and it’s down 24% over the past 12 months.

This is another share with attractive forecasts and big dividends. Analysts expect the P/E to drop to around six over the next couple of years. And they’re predicting a dividend yield that would exceed 9%.

Again, like Aviva, forecasts could easily be adjusted downwards now. And I do think Legal & General could have a tougher year ahead than previously expected.

But with my long-term investing horizon, I’ve always liked the financial sector. It certainly has its ups and downs. But I reckon the downs can provide great times to buy.

Falling share price

Although the dividend may look good, the Aviva share price performance has been poor lately. Over the past year, for example, it has tumbled 24%. That said, in May Aviva consolidated shares (and issued a special dividend).

That reflects a number of concerns. A worsening economy could hurt profits at financial services providers like Aviva. The business has been slimming down, which is good for its balance sheet but might limit future earnings potential. It also makes Aviva more reliant than before on a few key markets, so if demand in the UK weakens, for example, that could eat heavily into profits.

Still, the share price fall suggests that investor enthusiasm for the insurer has cooled considerably. Could that make it a good time for me to add the shares to my portfolio?

The bull case for Aviva shares

Aviva is a large insurer with a long history and big customer base. It is definitely not the most exciting growth play I could own in my portfolio. But I like the durability of its business and the current dividend yield. I expect demand for insurance to remain high no matter what happens in the wider economy. With its famous brands, Aviva can benefit from that.

The company struck a bullish note about the outlook when delivering its interim results, pointing to expected growth in key business areas as well as the cost benefits of an efficiency drive. Admittedly, basic earnings per share were negative and fell significantly compared to the same period last year when they were also in the red. But, as with all insurers, a single set of accounts does not do full justice to the company’s business performance, due to the number of exceptional items that pop up in the industry. I think the momentum in the business is positive.

An interim dividend increase of 40% suggests management feels upbeat. It has told investors it is aiming for a full-year dividend of 31p per share, meaning the prospective yield is around 7.3%. The Aviva dividend was cut in 2020, but if management delivers on its current plan, this year’s dividend will be slightly larger than it was before the pandemic.

My move

With a solid but unexciting business, positive commercial outlook, and appealing dividend yield, the falling Aviva share price has made it look more attractive to me than before.

For that reason, I would now consider buying it for my portfolio. I would do so primarily because of the income opportunity I see here. If the business performs well, the share price may recover with time, but in the short term, I expect it could yet fall further. Clearly a lot of investors currently do not feel positive about the firm, which is why Aviva shares have been sliding. As a buy-and-hold investor considering a stake in what I see as a quality business, such a prospect does not bother me. I would be happy to buy today — and wait.

Aviva share price soars

As a quick reminder, Aviva is the largest insurance business in the UK. It has over 15m customers and a long track record, with roots stretching back over 300 years.

So what’s the current state of play with the Aviva share price? Well, as I write, the shares are trading for 430p. At this time last year, the stock was trading for 396p, which equates to an 8% return over a 12-month period. More recently, the shares have returned nearly 20% since March, when they dropped to 360p.

Risks to note

Aviva has been a passive income-seekers’ haven in recent times. This is one of the things that has drawn my attention to the stock as well as the recent Aviva share price resurgence. I am conscious, however, that dividends are never guaranteed. They can be cancelled at the discretion of the business at any time. In fact, Aviva cancelled its dividend when the pandemic struck, like many other stocks. Furthermore, subsequent dividends have been less than at pre-pandemic levels.

Next, Aviva has been in the process of streamlining operations and disposing of non-core businesses. It decided to undertake this exercise to push growth, and get rid of unprofitable businesses that have actually left it with debt. Debt is usually a red flag for me, even more so in times of economic uncertainty like now. Restructuring, paying down debt, and maintaining growth and consistent returns is no easy feat. I will keep an eye on developments on all fronts against the current economic volatility.

Why I like Aviva shares and would buy them

So to the bull case then. I like Aviva shares for a few key reasons. The first has to be the level of returns on offer and the fact it seems to be cash-rich and willing to return this cash to investors. At current levels, Aviva’s dividend yield stands just under 7%. This is higher than the FTSE 100 average of 3%-4%. It confirmed a £1bn share buyback scheme in March and intends to announce another when full-year results are due later in the year.

Next, despite the Aviva share price being on a great run in recent months, the shares still look good value for money. The FTSE 100 average price-to-earnings ratio sits close to 15. Aviva’s ratio is currently six.

Furthermore, Aviva has defensive traits, in my opinion. No matter the economic outlook and backdrop, car insurance is a must. Based on Aviva’s profile and presence, it should be able to leverage this position into performance growth and returns.

To summarise, I think Aviva is an excellent stock to add to my holdings for the passive income opportunity alone. As a bonus, it is a market leader in its respective sector, with growth plans and a willingness to return cash to investors. I would buy the shares today.

There’s a lot for me to like about Aviva (LSE: AV) shares now. And one of the top attractions is the generous-looking shareholder dividend. With the share price near 440p, the forward-looking yield is just above 8% for 2023.

However, a high dividend yield can sometimes mean the market is worried about something. Fat dividends can occur because a company’s valuation is depressed. And in the case of Aviva, caution could be the watchword because of cyclicality.

Robust forward-looking dividend estimates

The firm offers savings, retirement and insurance products. And rightly or wrongly, I reckon there’s a general perception the industry could struggle in lean economic times. Even the company’s own directors play a cautious hand. For example, they were quick to axe the final dividend of 2019 when the pandemic struck.

Of course, Aviva wasn’t alone in binning shareholder dividends when Covid-19 led to lockdowns. But some businesses merely postponed dividends and paid them to shareholders later. And others paid dividends right through the coronavirus crisis. 

I think Aviva’s reaction through the pandemic demonstrated its weakness, whereas some other businesses proved their strength. Indeed, not only did Aviva trash its final dividend of 2019, it also paid lower subsequent dividends. Prior to the pandemic, steady annual rises saw the total dividend peak at 39.5p per share for 2018. But for 2020, the total for the year was just 27.6p per share.

In fairness, Aviva has jumped right back into the groove of raising its payout a bit each year since. The payment for 2021 was 5% higher. And City analysts predict a rise of just over 13% in the total dividend for the current year and around 9% for 2023.

A positive outlook

The company delivered its half-year report on 10 August. And the headline was: “Continuing momentum with strong first-half results demonstrating benefits of diversified business model.” 

Looking ahead, the directors said they’re “confident” about the outlook for the rest of 2022 despite a “challenging market backdrop”. Chief executive Amanda Blanc reflected on an “excellent” six months for Aviva citing higher sales, larger operating profits and a stronger financial position. And she said the scale and diversification of the business gives “resilience and opportunity” and the ability to withstand the current challenging economic climate.

With operating profit 14% higher year on year, there’s little doubt trading has been robust. And Aviva has found other ways to reward shareholders beyond the dividend. For example, in May it returned capital of £3.75bn to shareholders. And that worked out at a payment of 101.69p per ordinary share. Blanc said the move arose because of the company’s “successful divestment programme”.

Prior to that, Aviva completed a £1bn share buyback programme in March. And it plans to announce another buyback with the full-year results for 2022.

Despite my mild reservations about cyclicality, the firm appears to be flush with cash and trading well. So, I think I should buy shares in Aviva now.