The Commonwealth Bank of Australia (ASX: CBA) share price is down 3% to $77.06 this morning, but there's no need for shareholders to throw the baby out with the bath water just yet.
The shares are down as the bank has gone without the rights to its $2.31 per share final fully franked dividend.
Commonly on the day a stock trades without the rights to a twice yearly dividend it's value will fall roughly in line with that of the dividend payment. CBA shares are down $2.40 this morning, almost exactly in line with the $2.31 value of the dividend.
If you assume that the bank can maintain annual dividends at $4.62 per share in FY20 it offers a yield of 6% plus full franking credits.
This would be attractive to many conservative or SMSF investors seeking retirement income from a 'defensive' business, but investors must be aware it's possible that even the CBA will be forced to cut its dividend over the next 12 months.
At the end of the day earnings pay dividends and if CBA's earnings fall on the back of a weak Australian economy, rising costs, and ultra-low cash rates the dividend will come down with the earnings.
Recently, National Australia Bank Ltd (ASX: NAB) was forced to cut its dividend 16% and none of the 'blue chip' big banks are immune from potential dividend cuts.
