Is time running out to buy high-yield ASX dividend shares?

Is time running out to buy high-yield ASX dividend shares? Potentially.

The ASX is full of dividend-paying shares. Some offer high dividend yields, and some offer low dividend yields. Some don’t even pay dividends at all, but let’s not bother with those today.

So to understand the ins and outs of a dividend yield, we have to keep one thing in mind. A company’s dividend yield is a product of two things. The first is the dividends per share it pays out every year. Without any dividends, we can’t get a yield after all.

But the second thing is a company’s share price. A dividend yield will only be high if it stacks up favourably against its own company’s share price. To illustrate, let’s look at a real-life example.

Lower prices mean higher yields

Commonwealth Bank of Australia (ASX: CBA) is one of the most popular ASX dividend shares on the market. Over the past 12 months (as of Thursday this week), this ASX 200 bank has paid out two dividends. There was the August final dividend of $2.10 per share, fully franked.

Following that, we’re about to see CBA’s interim dividend for 2023 hit bank accounts on 30 March this week. That dividend will also be worth $2.10 per share. That’s an annual total of $4.20 per share.

Now, Commonwealth Bank last traded at a share price of $96.06. If we divide CBA’s dividends per share ($4.20) by its share price ($96.06), we get a percentage figure of 4.37% – CBA’s current dividend yield.

But if CBA were to shoot up to $200 a share tomorrow (not a prediction), its dividend yield would fall to 2.1%, despite the dividends themselves remaining constant.

Conversely, if CBA cratered to $50 a share tomorrow, its dividend yield would balloon to 8.4%.

Thus, a company’s share price is just as important as the raw dividends it pays when it comes to the dividend yield.

Is it too late to buy high-yield ASX dividend shares today?

So that brings us to the question of time running out to secure high-yield dividend shares.

To kick things off, no one knows what the share market might do tomorrow, next month, or next year. ASX shares could crater over the rest of 2023, making ASX dividend shares even more appealing. Or else, today could be the lowest point the share market reaches for the rest of the year. Either scenario is possible, as is something in the middle.

But I don’t worry about that. I look for what the market is serving up right now and assume that a dollar today is worth more than a dollar tomorrow.

So I’m buying dividend shares right now, with some of my favourite choices including Washington H. Soul Pattinson and Co Ltd (ASX: SOL) and Wesfarmers Ltd (ASX: WES).

If the market falls over the rest of the year, I’ll buy more. If it keeps going up, I’ll still buy more. The market tends to go up more often than it goes down. So it’s probably just better to buy today, if you can.

The post Is time running out to buy high-yield ASX dividend shares? appeared first on The Motley Fool Australia.

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More reading

• Stay away from this ASX sector (and buy this one instead): expert
• Own CBA shares? This could be the banking major’s next acquisition
• How much do I need to invest in ASX shares for $100 in weekly passive income?
• The whopper Wesfarmers dividend is being paid today. Here’s what you need to know
• Is right now a once-in-a-decade opportunity to buy ASX 200 bank shares?

Motley Fool contributor Sebastian Bowen has positions in Wesfarmers and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia has positions in and has recommended Washington H. Soul Pattinson and Company Limited and Wesfarmers. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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