The Commonwealth Bank of Australia (ASX: CBA) share price is falling today.
CBA shares had broken through the $90 per share ceiling for the first time since 2015 earlier this month, but today the CBA share price is well and truly back below this psychologically important level.
Yesterday, Commonwealth Bank shares closed at $90.26, but opened this morning at $88.01 and have since trended lower still – going for $87.63 at the time of writing.
Why are CBA shares dropping today?
We can mostly put CommBank's steep drop to the bank going ex-dividend for its 2020 interim dividend yesterday (for the six-months ending December 31, 2019).
Going 'ex-dividend' means that anyone who buys CBA shares today will not be eligible for the interim dividend Commonwealth Bank will be paying on March 31, 2020 (whereas anyone who bought yesterday or earlier will be).
Dividends represent cash leaving a company's books and so also represent a less-valuable company on paper – which of course translates into a lower share price.
CommBank's interim dividend will come in at $2 per share – in line with last year's interim payout. The dividend will also come fully franked, which means that CBA shares today offer a trailing yield of 4.92% (or 7.03% grossed-up) on current prices.
CommBank shareholders will no doubt be pleased, as today's payout extends Commonwealth Bank's reputation as the 'safe' dividend-paying ASX bank.
CommBank's banking stable-mates Australia and New Zealand Banking Group (ASX: ANZ), Westpac Banking Corp (ASX: WBC) and National Australia Bank Ltd. (ASX: NAB) all either cut their dividends last year or their level of franking credits (in ANZ's case).
Westpac and NAB have also recently undergone capital raising programs as well.
Is the CBA share price in the buy zone?
I think it's worth noting that with a raw trailing yield now under 5%, Commonwealth Bank is now at a historically unattractive entry point from a dividend perspective. This time last year, the same shares would be offering a raw yield over 6% – which is starting to look a fair way off the current offering of 4.92%.
By contrast, NAB is currently showing a 6.08% yield, Westpac a 6.8% and ANZ 5.99%.
I do agree with the market that CommBank is the bank in the best shape at the moment. But you as an investor will have to decide how much of a premium you're willing to pay for that reputation.
I'm not too excited about Commonwealth bank shares at the moment myself, there might be better income opportunities out there!
