Millions of us invest for a passive income. Some of us might not be aiming for a passive income today, but building wealth with the aim of taking one in the future.
Either way, moments like this one matter. With current instability sending shockwaves through energy markets and global supply chains, stocks across various sectors have come under pressure. And for income investors, that creates an opportunity worth paying attention to.
Some will argue that profiting from instability means gaining from the misfortune of others. But markets have always moved this way, and for long-term investors, recognising opportunity isn’t the same as celebrating the cause of it.
Share prices go down, yields go up
Warren Buffett famously said to “be fearful when others are greedy, and greedy when others are fearful.” It’s one of investing’s most quoted lines — but for passive income, it carries a meaning that goes beyond simple contrarianism. It’s actually a mathematical truth baked into how income investing works.
It’s obvious to many, but it’s an insight that many new investors miss: share prices and dividend yields move in opposite directions.
When a company’s share price falls, its yield rises — and vice versa. If a stock pays 10p per share annually and trades at 200p, the yield is 5%. But if fear grips the market and the price drops to 100p, that same 10p dividend now delivers a 10% yield — without the company changing its payout at all.
This is why Buffett’s famous prescription is especially powerful for passive income investors. On paper, the best time to buy stocks is when everyone else is fearful and stocks go into reverse.
Of course, the caveat is that stocks can fall if a company reports uninspiring earnings or elects to cut the dividend. But this something investors simply need to look at themselves.
Buffett’s Berkshire Hathaway has deployed this logic repeatedly over the decades. It loads up on high-quality businesses during downturns when sentiment is low and valuations are compressed. It’s not just buying cheap stock. It’s locking in superior long-term yields at a point when the crowd is heading for the exit.
One to consider
One stock that has pulled back a little over the past few days is TBC Bank (LSE:TBCG). It’s a Georgian bank with operations in Uzbekistan. I’d suggest it’s not surprisingly it’s pulled back given the proximity to a war zone.
It’s a great value, growth, and dividend play, and that’s why I like it so much. It trades at 5.9 times forward earnings — much cheaper than its peers. It’s projected to grow revenue by around 17% over the next two years — the 17th-fastest on the FTSE All Share. And it offers a forward dividend yield of 5.7%.
The yield is actually projected to reach 6.5% in 2027. That’s really quite sizeable when we consider — unlike some peers — this is covered handsomely by earnings. The coverage ratio sits at 2.9 times.
The risk here is the Uzbek operations. It’s not a mature market and regulatory changes have hampered the business’s growth. Nonetheless, I certainly think it’s worth considering.
