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The discussion about market volatility is increasing in the middle of the country’s tension. Of course, no one can predict what may cause a crash (if it happens, it can take away the surprise). So, the next best thing is to have a clear game plan for when (or if) a crash happens. When it comes to income, here is an approach that investors can consider.
Improved productivity
For all the turmoil caused by the stock market crash, there are actually some good things to take away from it. Another is related to the increase in dividend yield. When we break it down, the dividend yield is made up of the share price and the dividend per share. Logically, if the price goes down but the dividend stays the same, the yield will go up.
Let’s say a stock is trading at 100p with a dividend of 5p. The yield is 5%. If the crash causes the stock to fall to 75p, but the dividend remains the same, the yield is now 6.66%. In terms of conversion, it’s up 33%!
This means that smart income investors can pick up equity stocks that fall during a crash and profit from this extra yield. Of course, if the dividend is cut in the future because the company suffered from whatever caused the crash, that’s a problem. But during market movements, some stocks fall simply because investors are afraid. Some firms are not affected by the cause of the collapse but still experience a short-term decline. Those are the stocks you should target.
In the medium term, we have been able to see prices return, with dividends remaining unchanged. Of course, there is no guarantee that this will happen, and it is a risk that needs to be accepted.
One for the watch list
If we see a crash that causes many stocks to fall, that’s what investors are likely to consider Paragon Banking Group (LSE:PAG). Over the past year, the share price has increased by 18%, with an annual yield of 4.88%.
On a fundamental level, Paragon has been increasing earnings per share and underlying profit, which in turn supports dividend growth. In its latest fiscal year to September 2025, earnings per share rose 8.5%, while dividends grew 8.7%. As a result, I conclude that the dividend is sustainable as it grows in line with profits.
Although the specialist lender has flagged that recent customer activity has shown widespread uncertainty, I think this will ease in 2026. The recent government budget was not as bad as some thought it would be for some of Paragon’s key clients, such as landlords. If interest rates drop significantly this year, it could help trigger more demand for loans from both home owners and more commercial customers.
In terms of risks, the FCA’s ongoing investigation into a sector-wide car subsidy scandal could hurt Paragon. It recently increased the claims provision to £25.5m. But this may rise in the future depending on what decides.
Even so, I think that if there was a market crash around something that didn’t affect Paragon, any selloff would make it a potential income stock for investors.
