8.4% dividend yield! Here’s one of my favourite cheap FTSE 100 shares for passive income

Only one week in the past, merchants and buyers have been panicking that world inventory markets may fall off a cliff. Not solely have these fears didn’t transpire (not less than for now), the FTSE 100 index of shares has really clawed again all of its earlier losses.

Discount hunters shouldn’t be deterred by this wholesome rebound, nevertheless. Years of underperformance imply the Footsie stays full of wonderful worth shares to purchase.

So which might I purchase if I had spare money to speculate? Right here’s one among my favourites. Dealer forecasts recommend it may very well be an low-cost solution to make an enormous passive revenue for the following few years not less than.

A cut price inventory

Aviva‘s (LSE:AV.) share value carries an unlimited 7.3% dividend yield for 2024. This makes it one of many largest potential dividend payers on the FTSE 100 at present.

The corporate additionally presents wonderful worth on the subject of predicted earnings. Metropolis analysts suppose earnings right here will soar 21% this 12 months, leaving it on a price-to-earnings development (PEG) ratio of 0.5.

Any sub-1 studying implies {that a} inventory is undervalued.

There’s loads to love about Aviva. Certainly, I personal its shares in my Particular person Financial savings Account (ISA) and my Self-Invested Private Pension (SIPP).

I like its wonderful model energy and strong place in fast-growing markets. Demand for retirement, wealth and insurance coverage merchandise is rising strongly as populations age in its UK, Irish and Canadian areas.

I’m additionally an enormous fan of Aviva’s distinctive money era. This provides it money for natural funding, acquisitions, dividends and share buybacks. It’s Solvency II capital ratio is constantly above 200%.

Dangers

However like every share, it isn’t with out threat. Income right here susceptible to dropping when shopper spending falls in robust financial intervals.

The enterprise — which additionally has a substantial basic insurance coverage division — can also be uncovered to rising declare prices because of local weather change.

The Affiliation of British Insurers (ABI) says that storms and heavy rainfall pushed property insurance coverage claims to £1.4bn between April and June. This was the best determine since information started (albeit not way back, in 2017). It’s unlikely to stay the all-time excessive, nevertheless, as excessive climate occasions earlier than extra frequent.

That dividend yield

However on stability, I feel the potential advantages of proudly owning Aviva shares outweigh the dangers. I feel it may very well be an particularly good solution to make a big second revenue.

As we will see, Metropolis analysts count on dividends to maintain rising over the following few years not less than. This pushes the dividend yield as excessive as 8.4%, greater than twice the Footsie common of three.5%.

I feel that dividends will rise strongly over the long run too, underpinned by the agency’s accelerating funding in capital-light companies to use its rising markets.

At 434p, I feel the Aviva’s share value is just too low for me to disregard when I’ve the cash.