A passive approach to stock investing can work well when you’re collecting dividend income. Let’s be forthright, there’s more to life than obsessing over corporate reports and stock charts—and we don’t have to.

As long as DIY investors are willing to do their research before selecting companies and stocks, a diversified portfolio of assets can prove beneficial in the long run.

Dividend Reinvestment Program

Yet great investors like billionaire Warren Buffett have outperformed stock market gains by dedicating their lives to the game.

By his own data, Buffett’s cumulative long-term annual return is just under 20%. However, in America S&P500 The index has recorded a cumulative annual gain of just over 10% compared with corresponding decades since the 1960s.

For many investors, compound returns of around 10% per year on average could add up to a tidy sum over the years and decades. But to pursue such progress, I believe it is critical to invest those passive dividend gains back into stocks along the way to hopefully see the pot grow.

But what should we buy? Well, my favorite passive income right now is Aviva (LSE: AV.), a British insurance, property and pensions company operating in the broad financial sector.

At the time of writing (29th August) the share price is around 506p. This means the projected dividend yield for 2025 is just over 7.5% and in my opinion the valuation makes the shares look affordable.

There aren’t many bank accounts that would give me such high interest. So is Aviva a no-brainer? No, it’s not. Stocks and shares aren’t as unthreatening as bank accounts. There’s always a risk involved with investing money in shares.

For example, company directors have the power to trim or stop dividends at their discretion. And they often do so if the underlying business is struggling. In addition, stock prices can fall as well as rise. So the money we invest in stocks can rise and fall in value.

It looks like the dividend will continue to grow

Another risk for Aviva is that its business is quite sensitive to general economic cycles. So if we see another half-decent recession or global economic slowdown, it is possible – even likely – that Aviva’s profits could fall.

If this happens, the share price will likely fall and, as mentioned, directors may even cut the dividend.

But I wouldn’t write off Aviva just because of these risks. I think the company is worth investigating and considering now. It might be worth considering it as one of the potential positions in a portfolio of several stocks.

The dividend has increased modestly each year since 2019, with City analysts expecting further increases in 2024 and 2025. Such a forceful dividend record speaks volumes about the strength of the underlying operations and the directors’ positive view of the company’s prospects.

Aviva is trading well and the valuation looks modest. That’s why it’s one of my favorite passive income stocks to consider right now.