Dynamic load and groundwater have a significant influence on the safety and stability of engineering rock mass during underground blasting excavation. In order to study the influence of dynamic load and water content on the failure and energy dissipation characteristics of rock mass, dynamic impact tests including four impact velocities and six water content levels on red sandstone were carried out with an improved SHPB test device. By analyzing the variation laws of energy reflectivity, transmissivity, and dissipation rate under different water contents, an empirical model representing the relationship between energy dissipation characteristics and water content of red sandstone was established. Screening tests were conducted on specimen fragments, and the variation law of fractal dimension of rock fracture with water content was studied according to the fractal theory. The results show that: 1) Under the same impact velocity, the energy transmissivity and water content have an exponential function relationship and a negative correlation, the energy dissipation rate increases first and then decreases with the increasing water content, and they have a quadratic function relationship. 2) Under the same water content, the energy transmissivity is negatively correlated with the impact velocity, while the energy dissipation rate is positively correlated with the impact velocity. 3) For the specimens with macroscopic failure, the failure degree of red sandstone increases with the increase of water content, with a turning point at the water content of 1%, and the fracture fractal dimension has an exponential function relationship with water content.