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.

Navigating market chaos

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.

Where to look?

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.

This was all triggered by Trump’s aggressive tariff policies and escalating global trade tensions. The sell-off has become the largest market decline since the Covid-19 crash of 2020.

However, while the volatility and uncertainty are unsettling, history suggests that such rare market events can present exceptional opportunities for long-term and second income investors.

But what makes this sell-off different? Well, it’s fair to say that uncertainty is rife. This year’s downturn was sparked by sweeping US tariffs that led to panic selling and a sharp spike in volatility.

Investors initially fled to bonds, but even those markets became unstable as yields surged, reflecting a loss of confidence in US fiscal policy and fears of rising inflation. While the immediate outlook remains uncertain, these conditions have driven down share prices across sectors, including many reliable dividend payers.

A window for second income seekers

Investing during market turmoil is never easy, but history shows that those who buy when fear is high and valuations are depressed can reap significant rewards over time. While a full recovery may take months or even years, global markets have always bounced back from past crises.

Periods of indiscriminate selling often result in quality income stocks trading at attractive valuations. However, the market’s really mixed and we have seen some investors search for shelter in UK-listed dividend stocks. US income stocks however, do appear harder hit. This could be a rare opportunity.

One stock to watch

Nordic American Tankers (NYSE:NAT) stands out as an intriguing second income prospect in 2025. Like many of its peers, the share price has shown weakness in recent months. In fact, over the past year, Nordic’s stock has dropped 35% amid weaker demand and normalising charter rates.

In Q4, earnings per share came in at just $0.01 and revenue missed expectations by $5m. This marks the end of an unusually strong period for tanker operators, as spot TCE (Time Charter Equivalent) rates have fallen sharply from last year’s highs — this had been driven by geopolitical disruptions that have since eased.

However, Nordic American’s appeal for income investors lies in its robust dividend outlook. Analysts forecast a forward yield of 9.4% for 2025, rising to 14.7% and 17.2% in the following years. This is supported by a tight global supply of younger Suezmax tankers and limited shipyard capacity for new builds. The company’s expanding fleet — now 21 vessels — also positions it to benefit if spot rates rebound, and insider buying signals management’s confidence.

Yet risks are significant. The company’s heavy spot market exposure and high debt — net debt at $210m and a debt/equity ratio of 0.53 — make it vulnerable to further rate declines and market volatility. Additionally, the company’s declining book value and slow fleet renewal raise questions about long-term capital management.

In short, for second income seekers, Nordic American offers high yield potential, but this comes with elevated risk and cyclical exposure. It’s one that I personally find very interesting. However, I’ll keep my powder dry for now.

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That means if I were to invest £1,000 today, I’d receive £132 over the next 12 months in the form of dividends. Interestingly, the company pays its dividends quarterly, which may interest investors looking for regular cash flow.

So, what is this lesser-known dividend stock? Well, it’s Nordic American Tankers (NYSE:NAT), a US-listed company that specialises in Suezmax crude oil tankers. 

An overlooked sector

Nordic American Tankers operates a fleet of 19 such tankers. Suezmax vessels are designed to transit the Suez Canal at full capacity, typically carrying around one million barrels of oil.

These ships are versatile, able to serve many major ports and navigate through key shipping routes like the Suez and Panama Canals.

Ship supply has been drastically impacted over the last year due to droughts in Panama and attacks on ships in the Red Sea. This scarcity of available ships has led to an uptick in earnings for companies like Nordic. The firm reported that about 57% of its spot voyage days for Q1 2024 were booked at an average Time Charter Equivalent (TCE) of $40,690 per day per ship — that’s far above long-term averages.

Scarcity isn’t just an issue in the short term, however.

Tanker companies delayed new orders during the pandemic. The result is a much older global fleet than we’ve seen for years. And these tankers take years to build.

As such, supply shortages are expected to persist.

A dividend giant, but there are issues

Nordic American is a dividend giant, having paid a dividend for each of the last 108 quarters. It’s a truly phenomenal record.

However, dividends haven’t always increased during the period, and sometimes the dividend payments have been fairly nominal.

This year, Nordic American is due to pay $0.48 per share in dividends, based on the current $0.12 per share per quarter.

However, the company is only forecast to earn $0.43 per share in 2024, suggesting that management is paying out more in dividends than the company earns. It also points to a forward price-to-earnings of 8.5 times — a 24% discount to the sector.

This payout ratio is a big red flag and one that suggests the dividend will have to fall.

The caveat is that financial performance is expected to improve significantly in 2025. According to analysts, Nordic will earn $0.64 in 2025 and then $0.68 in 2026.

With this in mind, it may continue with the current dividend payments. But it’s a risk.

A risk worth taking?

Personally, I believe it’s a risk worth taking. I was first made aware of this stock by one of the world’s top analysts covering the shipping and tanker sectors. His returns — around 43% per annum over eight years — have been truly groundbreaking.

He thinks this stock will perform in the long run, and so do I.

The post This lesser-known US dividend stock has a P/E of 8.5 and a 13.2% yield appeared first on The Motley Fool UK.

So if I had £10,000 in the bank, where would I invest? Let’s take a closer look.

Food for thought

Firstly, it’s important to understand that dividend yields and share prices are inversely correlated, meaning as share prices fall, dividend yields rise, and vice versa.

This suggests that the best dividend opportunities can be found in overlooked sectors or markets.

For example, many UK stocks are still cheap on a relative basis and offer large dividend yields despite the FTSE 100 nearing all-time highs. The reason? A decade of underperformance and poor investor sentiment.

Secondly, the pound’s relative strength against the dollar could make US dividend stocks more appealing to UK investors. A stronger pound means investors can purchase more dollars, potentially increasing their buying power in the US market.

If the pound were to depreciate from here, investors would be receiving more dollars than if they bought today.

The caveat is that investors may have to search harder for big and sustainable dividend yields in the US. Because US stocks have outperformed their UK counterparts over the last decade, dividend yields are typically smaller.

Ticking both boxes

One dividend stock worth considering is US-listed Nordic American Tankers (NYSE:NAT), which currently offers a 12.9% dividend yield.

The company operates a fleet of 20 Suezmax oil tankers and has been reporting healthy EBITDA margins and cash flows due to strong day rates — the cost of leasing its vessels.

Day rates have surged as a result of a lack of supply and due to rerouting following attacks on vessels in the Red Sea.

With average time charter equivalent rates above $35,000 a day and daily operating costs of $9,000 a ship, you can see why I’m bullish.

Moreover, industry trends suggest sustained demand and limited supply growth through 2026, supporting the likelihood of continued high day rates.

Nonetheless, I appreciate that the stock could be easily rocked by economic data, such as weak Chinese or US economic growth and oil demand.

However, analysts estimate total returns of 15-20% over the next 12-15 months, making Nordic American an attractive option for income-focused investors.

The below chart shows the share price — along with the median, high, and low target price — and the dividend yield history.

Diversity is key

As much as I like Nordic American, it’s vitally important to maintain a diverse portfolio, so investors should consider a variety of stocks across different sectors.

This could include, say, Greencoat UK Wind in renewables, Phoenix Group in insurance, Lloyds in banking, Rio Tinto in mining, BT Group in communications, and GSK in pharma.

These are just ideas, but if I were to invest in these six stocks, plus Nordic American, I’d have a relatively diverse portfolio of dividend-paying stocks.

Collectively, these investments, if spread equally, would return around 6-7% annually. That’s certainly not a bad return.

The post Where to invest £10,000 for passive income? appeared first on The Motley Fool UK.

So here are three stocks I think investors could consider if they’re looking for sizeable dividend payouts. They all have risks, but also potentially high rewards.

Nordic American Tankers

I’ll start with the caveat that this stock, Nordic American Tankers (NYSE:NAT), underperformed in Q1. Analysts, including myself, were expecting some blockbuster results because Houthi attacks on vessels transiting the Red Sea had pushed the price of leasing vessels way up.

Spot rates — the cost of leasing a Nordic American vessel — remain elevated versus historic levels. This is not just because of Red Sea events, but because of a broader mismatch between supply and demand.

Analysts had been warning for some time that an imbalance was building in the tanker sector with new vessel orders falling drastically during the pandemic. As a result, just two supertankers are coming online this year.

As such, Nordic American, with its relatively young fleet of Suezmax tankers, should be in a great position to benefit during the medium term. The issue is, it needs to perform better than it did it Q1. It underperformed all of its peers, and it’s not clear why.

Currently, the stock offers a whopping 11.2% dividend yield.

Phoenix Group

Shares in Phoenix Group (LSE:PHNX) have recently fallen after announcing the possible sale of its SunLife business. In turn, this pushed the dividend yield above 10%.

The UK’s largest long-term savings and retirement business is transitioning from a closed-book life consolidator to a purpose-led retirement savings and income business.

It’s much more growth-oriented than it used to be, and that’s why the sale of SunLife doesn’t bother me. If it’s part of the transformation plan, I’m all for it.

Phoenix is also seizing the opportunities presented by the Pension Risk Transfer trend, supported by its in-house asset management expertise.

For now, interest rates remain an issue, putting downward pressure on asset prices. However, I certainly believe it’s a FTSE 100 stock worth watching closely.

TBC Bank Group

TBC Bank (LSE:TBCG) is a Georgian banking group listed on the UK stock exchange. The stock’s seen some pull back in recent months due to political factors.

With thousands taking to the streets of Tbilisi to protest against the ‘foreign agents’ law, and an election in a few months, investors are rightly concerned about stability.

Stability is key to economic growth, and banks are cyclical stocks. And this is why TBC Bank stock has dipped along with its Georgian peers.

I certainly think this is a stock worth keeping an eye on. Georgia has been Europe’s fastest growing economy since the pandemic and, politics aside, it could be a great growth market to have exposure to.

The stock currently offers an 8.8% dividend yield.

If I invested £10,000 in these three stocks, I could earn £1,000 annually in passive income and I think it’s worth keeping up to date with any developments relating to them.

The post These 3 passive income shares could generate a ton of dividends appeared first on The Motley Fool UK.

Dividends in the UK have increased in the past few years as the underperforming economy has resulted in rising yields. But now things are improving and with summer coming and an election on the horizon, it could all change.

So I’ve dug out two lesser-known dividend stocks that could continue paying high dividends throughout the year.

Nordic American Tankers

Nordic American Tankers is a fledgling tanker firm based in Bermuda that boasts a tiny staff of only 17 and a market cap of £833m. It owns and operates Suezmax double-hull crude oil tankers employed in competitive spot markets.

Although price action has been underwhelming of late, its recent Q4 and FY 2023 results came out positive. Net profit doubled from the previous quarter and revenue was up 15% from last year.

But much of that growth could be the result of two short-term factors: a drought in the Panama Canal and Houthi rebel attacks in the Suez. Both have pushed up the leasing rates for tankers, helping boost the company’s profits. Neither factor is expected to continue indefinitely, so profits could fall in the coming months or years.

Still, the company currently has a very lucrative 10% dividend yield with no pause to payments in the past decade. But the yield has been volatile, at times dropping to 2% and at other times increasing to 15%. That makes it difficult to estimate the dividend returns but, on average, they should remain quite high.

Overall, I think it’s an interesting – if somewhat risky – dividend stock that could deliver decent returns if things go well.

Impact Healthcare

Impact Healthcare is a real estate investment trust (REIT) specialising in the healthcare sector. This is a particularly defensive industry as demand for healthcare is unlikely to disappear overnight. And REIT rules dictate the fund must pay out 90% of rental profits as dividends.

Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice.

However, persistently high interest rates have put pressure on the real estate market over the past year. This has made it difficult for the fund to achieve significant gains, with the shares down 4.8%. If interest rate cuts continue to be delayed, the share price may fall further in 2024.

Still, it sports an attractive 8.6% dividend yield and an excellent track record of making payments. Since 2018, all quarterly payments have been honoured and the yield has increased steadily. I think the current price also looks cheap compared to peers — with a price-to-earnings (P/E) ratio of only 7.3, it’s lower than other REITS like Target Healthcare and Primary Health.

It’s also worth noting that the fund includes an ongoing charge of 1.51%, so this should be taken into account when estimating potential returns.

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So today, I’m comparing it to another stock, National Grid (LSE:NG.), which operates in a similar energy-focused sector, and has recently been in the limelight.

Nordic American

Nordic American’s recent earnings were something of a letdown. The small-cap oil tanker firm operates 20 Suezmax vessels — the largest tankers possible to fit through the Suez Canal — and these vessels are supposedly in demand given the disruption taking place around the Red Sea.

However, Q1 earnings showed that leasing rates were down from Q4 of 2023, albeit way above long-term averages.

So what now? Well, Nordic American’s still in a strong position to benefit from long-term trends within the sector.

Analysts had been warning for years that there were too few new tankers coming on-line. Just two supertankers will enter the global fleet in 2024. It’s reportedly the oldest global fleet in living memory.

And new capacity can’t come online immediately. These ships can take years to build. As a result, companies like Nordic American, with its streamlined and relatively young fleet of Suezmax tankers, are in prime position to benefit over the long run.

The dividend yield, as noted, currently sits at 11.39%. That’s huge, but potentially unsustainable unless earnings pick up in Q2 and Q3. As it stands, almost all of Nordic’s earnings for 2024 will be paid out in the form of dividends.

However, in 2025, the dividend coverage ratio will improve to around 1.5, based on projected earnings.

It’s no longer the slam-dunk buy that I and several analysts thought it was a few months ago, but it remains a strong dividend stock.

Even if the dividend’s cut, it’ll likely remain far above average.

National Grid

Shares in the National Grid slumped in May after the energy infrastructure giant announced a £7bn equity raise through a rights issue.

The raise will help National Grid fund future investments — the FTSE 100 company plans to spend £60bn over the next five years, double the previous half-decade — but it will increase the share count significantly.

In turn, this means earnings and dividends will be diluted. At first glance, investors might be drawn in by the 6.7% dividend yield. But, sadly, that’s not going to be the case after the shares are diluted.

Moreover, the company plans to reduce its dividend from 53.1p per to 45.3p per share as of next year to accommodate its investment plans.

The dividend coverage ratio hasn’t traditionally been the strongest. It came in at 1.15 in 2023 and 1.41 in 2024.

My calculations suggest the dividend yield will remain above the index average, but it’s nowhere near as strong as it appears at first glance.

The bottom line

Nordic American and National Grid are both above-average dividend payers but have unfavourable dividend coverage ratios in the near term.

Despite the recent disappointment, I’m sticking with Nordic American and I’m keeping away from National Grid shares for now.

The post Which is the best second income stock? National Grid vs Nordic American Tankers appeared first on The Motley Fool UK.

What’s with my optimism?

Putting the huge dividend to one side, Nordic American Tankers is operating in a booming sector. Analysts had been warning for years that the sector wasn’t building enough new vessels, and they were right.

Currently, the global tanker fleet is the oldest it’s been in living memory, and there are just two new supertankers entering service in 2024 — that’s 90% lower than the average this millennium.

Remember, old vessels can’t operate on prime contracts. Big energy companies like Exxon and Vitol don’t use clapped-out Soviet tankers to transport their valuable products. This means well-prepared companies, especially those with plenty of vessels under 15-years-old, are perfectly positioned to benefit.

Red Sea turmoil

What’s more, there’s trouble in the Red Sea, one of the world’s most important shipping lanes. Due to Houthi attacks, approximately 90% of Red Sea shipping is being diverted around South Africa.

According to legendary investor J Mintzmyer, this rerouting “adds 40% to that key Asia to Europe route, it adds 60% to 70% to Asia-Mediterranean trades“. This is eating up any spare tanker capacity and has been pushing leasing rates sky-high on affected routes.

As the name suggests, Nordic American’s tankers are the largest vessels that can fit through the Suez Canal — Suezmax. And that means they’re in demand. The spot rate for leasing a Suezmax tanker has tripled over two years.

What’s happening next week?

Nordic American is due to report its Q1 2024 earnings next week — 29 May pre-market (US time). This means we’ll be able to see how well the company is performing.

Analysts are expecting the company to announce earnings per share of 11¢ and revenues of $66.19m. In the last quarter, the tanker stock reported earnings per share of 8¢ per share and revenues of $59.25m. So, we’re looking at a 10% increase in revenue.

Am I being too optimistic?

It’s not a perfect science, but leasing rates for Suezmax tankers remained strong throughout Q1. I don’t have the exact data, but long-run contracts appeared to running at a premium in Q1 compared with Q4, and spot rates remained elevated. The total average time charter equivalent (TCE) achieved by Nordic in Q4 was $39,170 per day per ship.

It’s also worth noting that peers like Scorpio Tankers, which I have been bullish on, also outperformed expectations in Q1. The larger tanker company highlighted higher TCE revenue in Q1 of 2024 versus Q4 of 2023.

However, it’s also worth recognising that the company’s own guidance is extremely important. Nordic’s management was cautious about how long these elevated prices would last. Should the Red Sea attacks stop, I’d also expect to see rates decrease in the short term. Long-term supply and demand imbalances remain.

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In the UK, years of underperformance have pushed dividend yields sky-high, and that’s great for dividend-hungry investors. But there are pockets of really interesting opportunities if we look further afield.

So, here are two cheap stocks with huge dividend yields that I’ve bought for my portfolio.

These are trailing dividend yields, but if they hold steady or increase over the next year, £20,000 of cash could deliver £2,060 of passive income annually.

What’s more, I believe both these businesses can grow steadily over the medium term. Here’s why I think savvy investors should take a closer look at these two companies.

Booming sector

The tanker sector is booming, and Nordic American’s Q4 results — released in February — were very strong. The company’s net profit for the quarter ($15.1m) was more than twice the net profit from the third quarter of 2023.

Nordic American is set to release its Q1 report on 29 May, and it could be another big one. A drought in the Panama Canal and the rerouting of vessels due to Houthi attacks in the Bab-el-Mandeb Strait have caused leasing rates to shoot up. In Q4, the cost of leasing a Nordic American Suezmax tanker averaged $41,580 per day. I’d expect something similar in Q1.

Nordic American’s management has previously struck a cautious tone, highlighting that rates will fall when these two issues subside. But that hasn’t happened yet.

Moreover, high leasing prices reflect a supply and demand imbalance in the sector. Experts had been warning for years that there weren’t enough new vessels entering the market. As such, the global tanker fleet is the oldest it’s been in living memory. Just two supertankers are set to join the global fleet in 2024 — the fewest in nearly four decades. We’re at the start of a supercycle.

We all need insurance

The insurance sector has underperformed in recent years as inflation introduced new challenges for insurers. Companies, including the FTSE 100‘s Phoenix Group, were forced to continually increase the cost of premiums as insurance claims jumped with inflation.

However, inflation is settling down, and margins in the insurance sector are improving. A recent report indicated an eight-year high for UK insurance broker profit margins. Why is that? Well just consider car insurance. The average cost of UK car insurance premiums jumped 34% from Q4 2022 to Q4 2023.

The outlook for the group, which owns famous brands such as Standard Life and SunLife, is pretty strong too. The company expects operating cash generation to rise by around 25% to £1.4bn by the end of 2026. Meanwhile, analysts expected earnings to grow 39% a year to end-2026.

Debt is one concern, however. It has a little more leverage than its peers, and that could be a worry for some investors.

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Nordic American Tankers: 11.9% yield

Nordic American Tankers (NYSE:NAT) offers a market-topping 11.9% dividend yield. Often big dividends like this are a warning sign, but I don’t believe that’s the case here. Its dividend coverage ratio of 1.26 times could be stronger. There isn’t much margin for error, but it’s operating in a booming sector.

The tanker industry is going through something of a supercycle due to supply and demand imbalances. Day rates for the type of tankers Nordic operates — Suezmax — have more than doubled over two years. What’s more, Houthi attacks near the Red Sea and low water levels on the Panama Canal have exacerbated vessel shortages (due to rerouting).

While a calming geopolitical environment may have a negative impact on day rates, the company’s own forecasts seem very conservative. Management suggested day rates could fall in Q1 and Q2. That hasn’t happened.

Phoenix Group: 10.8% yield

Phoenix Group is a FTSE 100 stalwart. It’s an insurer operating in a fairly mature part of the market. It doesn’t offer much in the way of growth, but it does have a 10.8% dividend yield and a coverage ratio of 1.6 times.

Inflation remains a challenge for insurers, and this is one reason insurance stocks have suffered over the past five years. However, it’s still a fairly safe industry, with positive influences in the form of bulk purchase annuities (BPA).

Legal & General: 8.6% yield

Legal & General is the leading player in the UK’s BPA market, and more than £50bn worth of bulk annuity business is estimated to have been written in 2023. It’s a big plus for this often slow-moving sector.

As noted above, inflation remains a challenge for insurers. However, we all need insurance. It’s an industry that isn’t going anywhere. These are stocks I buy and almost forget about — like bonds.

British American Tobacco: 9.7% yield

British American Tobacco is an amazing investment opportunity, but not for me. I’ll invest in mining, oil and gas, defence, but not tobacco. That’s personal. But, of course, there’s a risk that tobacco companies either have to evolve or risk becoming obsolete.

British American is trying to move smokers onto smokeless products. This is probably good for smokers, and probably good for the company. It may be more palatable in the future. Nonetheless, it currently offers a huge dividend yield of 9.7% for those who are happy to invest in the sector.

TBC Group: 7.5% yield

I’m long on Georgian banks, but I’m cautious about buying until after the election. Georgia is a politically polarised country and it’s election year. What’s more a foreign agents bill has engendered widespread protests and clashes with police.

As such, the TBC Group share price is giving up some of its gains. Up 255% over three years, but down 6% today, at the time of writing (2 May). I’d be wary that the stock could lose more value before stabilising.

However, it’s an excellent business, and if the share price falls, the dividend yield will rise. It’s a stock I’m keeping an eye on and I’m bullish over the long run.

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