Dividend shares have proved to be a great way to target a passive income down the years. But is now a good time to buy income-paying stocks as stock markets drop? I think so.

The terrible war in the Middle East is escalating. In the process it’s boosting oil prices, and by extension inflationary pressures that could impact interest rae cuts. Brent crude is above $100 a barrel for the first time since 2022, and could keep rising as the conflict goes on.

But as shares prices fall, I’m searching for cheap stocks to buy. Dividend yields are rising sharply as prices fall, and if the stock market crashes they could shoot through the roof. I don’t think this is a reason for investors to panic, and this is why.

The bigger picture

History shows that stock markets always recover strongly from periods of volatility. The FTSE 100 for instance hit new record highs this month near 11,000 points, overcoming challenges like foreign wars, pandemics, banking crises and economic downturns.

While my worries over the fate of the world persist, this soothes any nerves I have as a long-term investor. But that’s not all. It means I’m always on the lookout for brilliant bargains to buy. Quality stocks always slump alongside less robust companies during stock market panics. Investors who identify these and take action can significantly boost their long-term wealth.

Primary Health Properties (LSE:PHP) is one share I’m considering buying more of for my Stocks and Shares ISA.

A top stock to to buy?

Primary Health’s share price has plunged, reflecting the potential impact of surging oil prices on interest rates. The higher the rate, the greater pressure on these firms’ earnings, given the impact on asset values and borrowing costs.

This is why Primary Health’s share price has dropped back below 100p. The real estate investment trust (REIT) has fallen 7% in value over the last week. As a consequence, its dividend yield has soared to 7.2%, more than double the FTSE 100 average of 3.1%.

Of course dividends are never guaranteed. But I’m optimistic Primary Health should keep delivering market-mashing shareholder payouts. Under REIT rules, at least 90% of the firm’s annual rental earnings still need to be distributed by way of dividends. Therefore, the passive income it delivers won’t be affected directly by higher interest rates.

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I also believe earnings will hold up even if rising oil prices hit economic growth or increase inflation. This is thanks to its focus on the ultra-defensive healthcare sector, where it lets out properties like GP surgeries.

Here’s what I’m doing

I’ve been building up a cash pile to buy quality stocks like Primary Health on the dip. This investment trust is near the top of my list, though it’s not the only quality share that’s caught my eye. Now’s a great time to go searching for passive income shares.