Is this a great opportunity to lock in big dividend yields for a second income?

Has the market selloff created an opportunity for income investors? Let's find out.

| More on:
Australian dollar notes in the pocket of a man's jeans, symbolising dividends.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

If you've been thinking about building a second income stream from your investments, now might be one of the best windows in years to start doing exactly that — and it all comes down to one word: dividends.

The recent market pullback has left many quality ASX dividend shares trading at more attractive prices, which in turn has pushed their dividend yields higher.

In other words, investors can potentially lock in bigger income returns now than just a few months ago — simply by investing in the same businesses, but at lower entry points.

And if you're playing the long game, this might just be the ideal time to start building that income portfolio.

Why now could be the moment

With the ASX 200 still down around 8% from its highs, many dividend-paying stocks have been caught up in the selloff. But unlike speculative tech or unprofitable small caps, some of the most consistent income payers on the ASX have held up operationally — it is just their share prices that have dipped.

That's important because dividend yields move inversely with share prices. When share prices fall and dividends are maintained, yields go up.

Take for example Accent Group Ltd (ASX: AX1) shares. They are currently down 24% since the start of the year at $1.81.

Bell Potter is forecasting a fully franked 13.7 cents per share dividend in FY 2025, which is the equivalent of 7.6% dividend yield.

The case for income investing

Investing for dividend income isn't just for retirees anymore. More and more investors are looking at dividends as a way to supplement their salary, boost cash flow, or even cover everyday living costs.

Whether it is $200 a month or $1,000 a month, a portfolio built on reliable dividend payers can turn your capital into a dependable second income — without having to sell your shares.

And with dividend yields currently elevated, investors getting in today may be able to lock in those returns for years to come, especially if companies continue to grow their payouts over time.

Foolish takeaway

It is easy to overlook dividend investing in a market focused on volatility and daily headlines. But if you zoom out, the opportunity is clear: buy quality income stocks while they're down, and let the dividends do the heavy lifting.

Markets will eventually recover — they always do. But those who start accumulating strong dividend payers now might just find themselves sitting on a cash-generating machine later.

Motley Fool contributor James Mickleboro has positions in Accent Group. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Accent Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Dividend Investing

A male sharemarket analyst sits at his desk looking intently at his laptop with two other monitors next to him showing stock price movements
Dividend Investing

With a yield of 6.9%, how much upside does Macquarie tip for APA Group shares?

Let's see what the broker is saying about this high-yield dividend stock.

Read more »

A man holding a cup of coffee puts his thumb up and smiles while at laptop.
Dividend Investing

Buy Telstra and this top ASX dividend stock

Brokers have given the thumbs up to these income options this week.

Read more »

A woman wearing glasses and a black top smiles broadly as she stares at a money yarn full of coins representing the rising JB Hi-Fi share price and rising dividends over the past five years
Dividend Investing

Why I think these 2 ASX dividend shares offer great buying right now

These stocks offer potential for major dividend income.

Read more »

Hand of a woman carrying a bag of money, representing the concept of saving money or earning dividends.
Dividend Investing

Buy these excellent ASX dividend stocks for a big income boost

Brokers think these stocks could be top picks for income investors.

Read more »

A smartly-dressed businesswoman walks outside while making a trade on her mobile phone.
Dividend Investing

Here's the Telstra dividend forecast through to 2028

Let's see where the telco giant's dividend could be heading.

Read more »

Woman smiling with her hands behind her back on her couch, symbolising passive income.
Dividend Investing

My ASX share portfolio's yield is 1.8%. Here's why I'm ok with that

A small dividend yield is not a bad thing.

Read more »

A happy male investor turns around on his chair to look at a friend while a laptop runs on his desk showing share price movements
Dividend Investing

Brokers name the ASX dividend shares to buy in June

Let's see what they are saying about these shares.

Read more »

Married elderly man and woman in love spending time together on bench on a phone, symbolising retirement.
Dividend Investing

Why I think these 2 ASX dividend stocks are top buys for retirees

These stocks offer investors a pleasing level of resilience and dividends.

Read more »