The S&P/ASX 200 Index (ASX: XJO) is once again in freefall today. At the time of writing, the ASX 200 has lost another 1.46%, which brings its losses to more than 6% over just the past month.
This is an awful thing for investors to deal with – no one likes seeing the value of their shares fall this rapidly. But it can also be an opportunity to pick up cheap ASX 200 dividend shares, if you let it.
The global financial system is going through a rough time, no doubt about it. Collapsing banks are never a good thing. But consider the context: ASX 200 shares have been through far worse before.
There was COVID, of course. But think about all the wars, recessions, depressions, and calamities that the Australian economy has faced over the past 100 years. After every single crisis, ASX shares have always recovered and hit new heights.
Sure, this time might be different. But I doubt it. And if it is, we've all got bigger things to worry about anyway.
In times like these, I always ask myself: 'What would Warren Buffett do?'
Would Buffett be buying cheap ASX 200 dividend shares today?
The legendary Warren Buffett is one of, if not the, greatest investor of all time. And he has very explicit advice for what to do when markets are in panic mode.
We all know about Buffett's most famous quote – the one about being greedy when others are fearful. But here are another two quotes that augment this simple but powerful idea:
The first is from Buffett's 2016 letter to the shareholders of Berkshire Hathaway:
Charlie and I have no magic plan to add earnings except to dream big and to be prepared mentally and financially to act fast when opportunities present themselves.
Every decade or so, dark clouds will fill the economic skies, and they will briefly rain gold. When downpours of that sort occur, it's imperative that we rush outdoors carrying washtubs, not teaspoons. And that we will do.
The second is from Buffett's 2013 letter:
A 'flash crash' or some other extreme market fluctuation can't hurt an investor any more than an erratic and mouthy neighbor can hurt my farm investment.
Indeed, tumbling markets can be helpful to the true investor if he has cash available when prices get far out of line with values. A climate of fear is your friend when investing; a euphoric world is your enemy.
So with this wisdom in mind, I think it's a perfect time to be buying ASX 200 dividend shares.
Remember, falling share prices can be especially lucrative for dividend investors. That's because a dividend share's yield rises for new investors when its share price falls. To illustrate, let's look at the Westpac Banking Corp (ASX: WBC) share price.
A month ago, Westpac shares were going for $22.76 each. Today, the bank is almost 7% below that share price, at its current going rate of $21.25 a share. Now, Westpac shares have paid out two dividends over the past 12 months, for a total of $1.25 in dividends per share.
At the share price of $22.76 that NAB recorded a month ago, these dividends would have given this ASX 200 bank share a dividend yield of 5.49%. But at today's share price of $27.77, we instead have a higher yield of 5.88%.
Repeat this process with any ASX 200 divided share that's fallen in value over the past month, and you will get a similar result.
So the current market could be a great time to follow Buffett's advice and load up on ASX dividend shares. I know I am.
