The Westpac Banking Corp (ASX: WBC) share price has been amongst the worst performers on the ASX 200 on Tuesday.
In early afternoon trade the banking giant's shares are down 4% to $26.68.
Why is the Westpac share price sinking lower today?
The main catalyst for today's weakness is the fact that Westpac's shares are trading ex-dividend. This means that the bank's shares are now trading without the rights to its upcoming dividend.
When this occurs, a company's share price will usually drop by the value of the dividend. This is to reflect the fact that the buyer won't be receiving it.
In respect to Westpac, earlier this month it cut its final dividend down by 15% from 94 cents per share to 80 cents per share.
This accounts for approximately 3% of today's 4% decline. The remainder could be down to the bank's share purchase plan (SPP) opening today.
Westpac is aiming to raise $500 million under the SPP. Though, depending on demand, it may scale back applications or issue a higher amount.
To be eligible for the SPP, you needed to be on the share register at the close of trade on November 1.
Eligible shareholders will be able to apply for up to $30,000 worth of shares at the cheaper of $25.32 or the volume weighted average price of Westpac shares during the five trading days up to and including the SPP closing date. This is expected to be December 2.
Given the discount on offer with the SPP, some investors may have been selling shares today with the intention of replacing them with SPP shares next month.
Incidentally, the next bank share to trade ex-dividend is National Australia Bank Ltd (ASX: NAB). Its shares will trade without the rights for its 83 cents per share dividend on Thursday. Which means investors have today and tomorrow to buy shares if they want to qualify for it.
