The share prices we're being offered right now seem too good to miss. There are many ASX dividend shares that look excellent value, which could enable pleasing share price growth and appealing dividend yields.
I'll show you why lower prices can make such a difference.
Boosted returns
Imagine there's an ASX dividend share that had a share price of $100 before all of this volatility came along and it paid a dividend of $5, or a yield of 5% in percentage terms.
If the share price dropped 25%, as many names have, the share price would become $75. If it keeps paying a dividend of $5 per share, new investors can get a dividend yield of 6.66%. That's a much stronger passive income return from the same business.
If the beaten-down ASX dividend share simply returns to the former share price of $100, that would represent a share price gain of 33% from $75.
The effect is even more pronounced if the ASX dividend share has fallen extremely hard. With a 50% fall, it would drop to a share price of $50. The $5 dividend per share would represent a 10% dividend yield and a recovery of the share price from $50 to $100 would be a 100% share price gain.
Which ASX dividend shares could be good buys?
It's certainly not guaranteed that something that has plunged will recover in 12 months, or ever.
Investors were lucky to experience such a fantastic (and quick) recovery after the COVID-19 crash.
The trick is to identify the ASX dividend shares that can bounce back and pay attractive dividends during this period.
It may be too much to expect some high-yielders to pay dividends as impressive as they did during COVID-19, but if they pay a dividend yield of around 10% in FY23 and FY24, then that could be very satisfactory.
Here are a few contenders:
The share price of GQG Partners Inc (ASX: GQG) has suffered a 17% drop since 16 January 2023 amid pain to its funds under management (FUM). In FY24, it's expected to pay a dividend yield of 10% according to Commsec estimates.
The share price of Shaver Shop Group Ltd (ASX: SSG) has dropped 16% since 6 February 2023 amid concerns about how households will cope with the current economic environment. Commsec numbers suggest it's going to pay a grossed-up dividend yield of 14.7% in FY24.
It's a similar retail story for the Adairs Ltd (ASX: ADH) share price, which is down 30% from 1 February 2023. The homewares and furniture retailer is projected to pay a grossed-up dividend yield of 13.2%.
Normally I'd like to talk about a name like Brickworks Limited (ASX: BKW) in my portfolio – where concerns about construction demand normally impact the share price – but it's currently quite resilient to market volatility.
I think that cheap ASX dividend shares give me the chance to accelerate wealth-building and help bring my retirement fund goals closer and I'd encourage other investors to think the same way.
