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ASX weakness could be met with $19bn “dividend bonanza”

The drop in the market could soon be met with a circa $19 billion wall of capital as investors collect their second biggest dividend checks in history.
The post ASX weakness could be met with $19bn “dividend bonanza” appeared first on The Motley Fool Australia. –

A young entrepreneur boy catching money at his desk, indicating growth in the ASX share price or dividends

The drop in the market could soon be met with a circa $19 billion wall of capital as investors collect their second biggest dividend checks in history.

The S&P/ASX 200 Index (Index:^AXJO) tumbled 1% in morning trade. If it closes in the red, this will mark its third consecutive day of losses.

Naysayers believe that the latest sell-off is an ominous sign and the start of a long-awaited market correction.

ASX dividend bonanza

But not all experts are convinced. In fact, Bell Potter’s high-profile institutional dealer Richard Coppleson believes the market drop could be short-lived due to a “dividend bonanza”.

He wrote in his daily Coppo Report that total dividends declared from last month’s reporting season is the second highest on record at $26.9 billion.

The largest was two years ago when ASX shares handed out $27.8 billion in the half year.

Biggest weekly dividend payout from ASX shares

Most of these dividends will be paid in the week starting 22 March. There are 75 ASX companies that are slated to pay out $12.3 billion next week alone.

These include ASX dividend kings like the BHP Group Ltd (ASX: BHP) share price, Fortescue Metals Group Limited (ASX: FMG) share price and Telstra Corporation Ltd (ASX: TLS) share price.

The week after will see another 48 ASX shares return $6.3 billion to shareholders. There’s every chance that most of this cash could find it’s way back into the market. I mean where else would investors park the cash in this near zero-rate environment?

ASX shares would look particularly enticing if the market was to pull back further, in my view.

April is a good month for ASX shares

It’s also worth pointing out that the month of April tends to be a positive period for the ASX. In the past six years, our market has only fallen once in April, according to Coppleson.

This was back in 2015 when the ASX 200 retreated 1.7%. However, the index rallied substantially every April from 2016. The “worst” positive April was in 2019 when the top 200 benchmark added 2.3% for the month.

As you may have guessed, the best April was last year when the ASX 200 surged 8.8%. This was following the bottom of the COVID-19 bear market.

Foolish takeaway

The ASX dividend shares recovery is also a bullish signal for investors in itself. Companies will only increase their dividends if they are feeling confident about their trading outlook.

ASX company boards know it’s a cardinal sin to cut dividends and will only do so if their backs are to the wall.

They could have held off increasing their dividends if they thought more tough times were ahead. But most didn’t.

This isn’t to say that we won’t be facing more market turbulence ahead. Remember the saying “sell in May, go away”?

But those with a longer investment horizon should be feeling upbeat enough to put their cash to work if share prices weaken further.

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Motley Fool contributor Brendon Lau owns shares of BHP Billiton Limited and Telstra Limited. Connect with me on Twitter @brenlau.

The Motley Fool Australia owns shares of and has recommended Telstra Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post ASX weakness could be met with $19bn “dividend bonanza” appeared first on The Motley Fool Australia.

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