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Inventory market crashes are occasions that the majority traders don’t discover nice. There’s part of human nature that merely abhors seeing the worth of 1’s investments drop considerably outdoors the traders’ management. But when there’s a inventory market crash this 12 months, I’ll be champing on the bit to spice up my passive earnings.

Why? Nicely, inventory market crashes sometimes ship the worth of all shares, not simply weak ones, down the gurgler. Simply check out what occurred to the S&P/ASX 200 Index (ASX: XJO) in the course of the COVID crash of 2020. Or the worldwide monetary disaster of 2008.

However this generally is a large shopping for alternative, particularly for dividend traders.

Inventory market crashes are dividend blessings in disguise

See, the dividend yield an investor can anticipate is a operate of two completely different inputs. The primary is how a lot in dividends per share an organization pays out. The second is the share value. Put merely, the decrease an organization’s share value is, the upper its dividend yield will likely be.

There are many ASX shares that don’t have a tendency to chop their dividends even in a recession or inventory market crash. Telstra Group Ltd (ASX: TLS), Coles Group Ltd (ASX: COL), Washington H. Soul Pattinson and Co Ltd (ASX: SOL)… These are all ASX dividend shares that didn’t reduce their payouts in 2020 or 2021.

However shopping for them in the course of the COVID crash of 2020 might have been enormously useful to a dividend investor. Let’s have a look at why.

So in 2019 and 2020, Telstra paid out an annual dividend of 16 cents per share. In early 2020, Telstra shares have been buying and selling at $3.90 apiece. A 16 cents per share annual dividend would have given Telstra traders a dividend yield of 4.1% at this share value. However by Might 2020, Telstra shares had crashed to round $2.99.

If an investor purchased Telstra shares then, they’d as an alternative take pleasure in a dividend yield of 5.35%.

Telstra has since upped its annual dividends to 16.5 cents per share in 2022. That will enhance the yield on price of our investor who purchased Telstra shares for $2.99 to five.52% at present.

So that is how a dividend earnings investor can enhance their passive dividend earnings in a inventory market crash. It’s actually the technique I’ll be making an attempt to make use of if there’s a inventory market crash in 2023.