Why now is a once-in-a-decade opportunity to make passive income from stocks

When people talk about once-in-a-decade or once-in-a-lifetime opportunities, I quickly find out more. It may be difficult to back up these claims, but there are good examples of ideas or reasons that can be applied. When it comes to passive income from dividend stocks, I think now is a unique time to buy.

Two areas of poor performance

Despite the FTSE 100 rallying hard over the past few months, there are some sectors that really underperformed. Concerns about the UK economy have caused areas such as property and financial services to decline as investors move to what they see as safer defensive stocks.

However, it just so happens that property and financial services are two areas that have historically been good dividend payers. For example, dividend yield for asset managers abrdn it has not fallen below 3.25% in the past decade.

I accept that housebuilders may experience some periods of pause in dividend payments, such as in 2020 with the pandemic. But on the whole, I find the area very profitable for income because of the profit margin and the level of cash flow.

How does this filter down to passive income

Due to the performance of the share price during the past year of the shares in this area, the dividend payment has increased significantly. For example, Taylor Wimpey Currently, the dividend payout per share remains stable, but the dividend yield has increased from 5.5% a year ago to 8.01% today. This rise is due to a 30% decline in the share price over the past year.

I think now is a once-in-a-decade opportunity to take advantage of the sector’s high dividend yield. We are in a phase of the economic cycle where these areas are neglected by investors. But when the recovery period and boom of the next bull market cycle begins, I expect the stock to rise in value.

If I assume the dividend stays the same for the next decade but the stock price increases, then the dividend yield will decrease. As economic cycles can take ten years, now may be the best time to buy to enjoy the high income potential.

Caution is warranted

The main risk for my view is that we are not at the bottom of the UK economy. For example, asset managers can see continuous outflows from customers. This could push the stock price lower. Or the performance of these stocks may mean that dividends are temporarily cut.

In the end, this risk is why I have created an income portfolio consisting of several property and finance related stocks. Not only that, but I will also include other income stocks that are less cyclical in nature.

Only time will tell if this interesting crop is the best we will see in a decade. But I’m going to start investing in small pieces to make sure I don’t miss the boat!