A positive side to falling ASX share prices

I have no doubt you've seen the negative headlines recently, however, there's something positive that comes from a falling ASX share market.

a woman

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

I have no doubt you have seen the negative headlines recently. They probably read something similar to 'ASX set to open X% lower', or '$XX billion wiped off the ASX', or 'ASX shares lower due to coronavirus spread'.

Now, these headlines may not be wrong, but they do focus on the negative. This is probably because of our loss aversion bias which states that the pain of losing is psychologically more powerful than the pleasure of an equal gain. This may give some credence as to why we respond more to negative headlines.

In saying that, it has been a tough time, and the S&P/ASX 200 Index (INDEXASX: XJO) has dropped another 3.2% today. However, spinning this around, we could somewhat roughly say that the average dividend yield has increased 3.2%. And that's not including the recent market falls prior to today. 

Now the numbers don't exactly work out as simply as that. However, it is true that as a company's share price drops, its dividend yield increases. This occurs thanks to you buying the shares at a lower price while the (trailing) dividend remains fixed. And as long as this share price fall isn't due to a drop in the company's fundamental earnings potential, which would effect its dividend paying ability, now could be a great time to snap up some dividend-paying ASX shares.

ASX dividend shares

Dividend shares such as Westpac Banking Corp (ASX: WBC) and WAM Capital Limited (ASX: WAM) have both fallen a little less or a little more than 10% over the past week. This means if you were looking at buying these shares for their dividend yield before, it's even better now.

In fact, based on today's closing prices, Westpac currently offers a grossed-up dividend yield of 10.51%. Even better than this is WAM Capital's current grossed-up yield of 10.61%.

Other dividend-paying shares I would consider buying in this falling ASX market are Washington H. Soul Pattinson and Co. Ltd (ASX: SOL), Tassal Group Limited (ASX: TGR), Rural Funds Group (ASX: RFF) and Transurban Group (ASX: TCL).

Foolish takeaway

All of the shares mentioned have followed the ASX 200 lower with their share prices falling over the recent past. However, as noted, this means that they trade with a higher dividend yield.

With the exception of WAM Capital which relies on its share portfolio return to pay dividends, I don't believe any of these companies' earnings will be materially effected by the coronavirus outbreak so long as it doesn't reach Australia.

This means that their dividend paying ability should remain intact. So, if you were considering buying ASX shares for their dividend income, I think now could provide a better opportunity.

Motley Fool contributor Michael Tonon owns shares of RURALFUNDS STAPLED and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia owns shares of and has recommended RURALFUNDS STAPLED, Transurban Group, and Washington H. Soul Pattinson and Company Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Share Market News

Two brokers analysing stocks.
Broker Notes

Morgans names 2 ASX shares to buy and 2 to hold

Let's see what the broker is saying about these shares.

Read more »

Hand holding out coal in front of a coal mine.
Broker Notes

Up 379% in 5 years, are Whitehaven Coal shares now a buy, hold or sell?

Here’s what Macquarie is forecasting for Whitehaven Coal shares into 2026.

Read more »

Woman with gold nuggets on her hand.
Broker Notes

Expert tips further upside for this surging ASX 200 gold stock

How much fuel is left in the tank for this gold mining heavyweight?

Read more »

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

5 things to watch on the ASX 200 on Tuesday

It looks set to be a tough session for Aussie investors.

Read more »

happy solar panel installers, solar energy
Share Market News

How Wesfarmers shares could benefit from the latest Bunnings product expansion

Bunnings has a growth plan to charge its profit higher.

Read more »

share buyers, investors, happy investors
Opinions

Why it could be a great time to buy AFIC shares

I’m optimistic about the return potential for this investment company.

Read more »

a couple clink champagne glasses on board a private aircraft with gourmet food plates set in front of them. They are wearing designer clothes and looking wealthy.
Opinions

Why I'm aiming for $1 million with ASX shares

I think it makes a lot of sense to invest in stocks to achieve wealth goals.

Read more »

Ten happy friends leaping in the air outdoors.
Share Gainers

Here are the top 10 ASX 200 shares today

Investors started the week off in a good mood today.

Read more »