During a stock market crash, many unprepared investors either freeze – or worse, panic. As a result, many miss the best income opportunities.

Right now, markets are trading sideways as investors are drawn to a 10-year gilt yield above 5.4%. That’s understandable – the FTSE 100’s average yield’s around 3.3%.

Naturally, that gap makes lower-yielding stocks seem less attractive. But in a downturn, I focus on sustainable dividend shares – not simply the highest yielders. A crash can create opportunities, but it can also expose weak businesses.

The key is knowing the difference.

Why the biggest yield isn’t always best

A high yield often reflects a falling share price, not a generous company. If profits and cash flows weaken, the payout can be cut — dividends are never guaranteed.

Imagine two shares. One yields 7%, but halves its dividend during a downturn. The other yields 4% and keeps growing its payout. Over several years, the lower yield could therefore prove more valuable.

Dividend cover matters too. Many high-yielders on the UK market are barely covered by forecast earnings. It’s common practice to screen for at least two-times cash coverage as a rough safety benchmark.

When markets turn, I care less about the size of the yield and more about how sustainable the payouts are. That means looking at cash generation, balance-sheet strength and realistic payout cover.

It also means favouring businesses with steady demand, such as utilities, insurers, consumer staples, healthcare and essential infrastructure.

One dividend share I have my eye on

Hikma Pharmaceuticals (LSE:HIK) is a useful example of the kind of business an investor might want to consider in the event of a market sell-off.

The company pays a dividend yield of about 4% with a payout ratio of 46.8%. That leaves more than enough scope to maintain the payout if conditions become tougher.

Clearly, it’s not a classic high-yield stock, but its dividend has increased at an average of 10% a year over the past decade. For example, in 2024, it raised its dividend from 72c to 80c per share.

Plus, its latest interim results support the income case:

• First-half revenue rose 4.2% to $1.73bn.
• Management reiterated full-year guidance for revenue growth of 2%-4%.
• Core operating profit guidance of $720m-$770m.

The pharma giant also increased research and development (R&D) spending by 18% in the first half, taking it to 5% of revenue. That investment’s aimed at building a stronger pipeline of more complex products.

Still, none of that makes it risk-free. Its injectables business, in particular, faces notable pricing pressure and competition. And with net debt rising to $1.69m in the first half, it’s now 1.9 times EBITDA.

The practical takeaway

A crash separates sustainable income from yield-chasing. The sensible plan is to screen for cash-flow resilience, favour dependable dividend growth and scale patiently rather than trying to call the bottom.

Hikma’s just the kind of stable, sustainable income stock that could become more attractive in a downturn. The recent appointment of Rebecca Hall as chief financial officer is another strong sign of progress. She arrives from ViiV Healthcare with more than 20 years’ industry experience.

I’m aware that increased R&D spending can be risky if it weighs too heavily on near-term profits. But if it pays off, the company’s in good stead to reward shareholders for years to come.

Should you invest £5,000 in Hikma Pharmaceuticals Plc right now?

When investing expert Mark Rogers and his team have a stock tip, it can pay to listen. After all, the flagship Twelfth Magpie Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.

And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Hikma Pharmaceuticals Plc made the list?

Mark Hartley does not hold any positions in the companies mentioned.