The silver lining in a market downturn: passive income opportunities galore

Yahoo

27-04-2025

Millions of Britons invest for a passive income. And one of the most simple premises is that downturns can be a gift. When share prices fall, dividend yields rise — not because companies are paying more, but because investors are paying less to own those income streams.
In other words, the same £100 dividend might now cost £1,500 instead of £2,000. For income-focused investors, that matters. The recent sell-off, especially in US stocks, has left even reliable dividend-payers trading at multi-year lows. Blue-chip stocks, REITs, and even select infrastructure plays are now offering yields not seen in years. While markets may remain volatile, the cash flows underpinning many of these businesses remain intact.
That creates a rare window. It's an opportunity to set up attractive income for the long term. As always, careful selection and diversification are key, as dividens are never guaranteed. However, in every correction or bear market, passive income investors have found reasons to be quietly optimistic.
The stock market has been chaotic in recent weeks. While most of the action has been in the US, British and European stocks have experienced plenty of volatility. Of course, uncertainty still reins, with Trump's administration continually moving the goal posts. That does make it more challenging to invest.
But for those focused on income, short-term turbulence can be a distraction rather than a deterrent. Dividends are typically paid on business fundamentals, not day-to-day sentiment. Provided the underlying company remains profitable and committed to shareholder returns, the income case can remain strong — even when the share price doesn't.
And in fact, periods of political and economic noise often lead to mispricings. Income-focused portfolios, grounded in value and cash flow, have historically outperformed in such conditions. For investors willing to filter out the noise, the current climate could be a chance to accumulate high-yield assets at unusually attractive prices.
Diversification is always key, and amid the current volatility, it's even more important. However, one individual stock to keep an eye on could be Nordic American Tankers (NYSE:NAT).
Nordic American Tankers is a dividend giant that deserves close attention, especially in today's volatile markets. The company boasts an impressive record, having paid a dividend every quarter for 27 years, and currently offers a forward yield near 9.4%.
Nordic American is a tanker company, as the name suggests, and is actively expanding its fleet, acquiring two fully financed Suezmax tankers in 2025, which should enhance both earnings and dividend capacity as the global fleet ages and supply remains tight. The company is well-positioned to benefit from persistent supply shortages, as new tanker orders remain low and older vessels are retired, supporting higher day rates over the long term.
However, investors should be wary of risks. Nordic American's current dividend may be unsustainable given the earnings forecast. As such, a reduced payment may be expected in the near term. Additionally, the company's heavy exposure to the spot market and a rising debt-to-equity ratio amplify both potential and risk.
Nonetheless, it's a favourite of some of the most successful funds in the world, include Renaissance Technology, and investors who have typically bought at a price-to-book discount have made money over the years.
It's a stock that on my radar, but I'll likely keep my powder dry for now.
The post The silver lining in a market downturn: passive income opportunities galore appeared first on The Motley Fool UK.
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James Fox has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
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