Why is the NAB (ASX:NAB) share price sinking today?

NAB's shares are falling on Monday…

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The National Australia Bank Ltd (ASX: NAB) share price is starting the week in the red.

In morning trade, the banking giant's shares are down 2.5% to $29.15.

Why is the NAB share price falling?

The weakness in the NAB share price on Monday has nothing to do with its performance or a broker note.

Rather, it has everything to do with the bank's shares trading ex-dividend this morning for its final dividend of FY 2021.

When a share trades ex-dividend, it means that new buyers will not be entitled to an upcoming dividend payment. In light of this, a share price will more often than not drop in line with the value of the dividend to reflect this. After all, why would you pay for something you're not going to receive?

The NAB dividend

Last week when NAB released its full year results, it revealed a 76.8% increase in cash earnings to $6,558 million. Management advised that this strong growth reflects notable items in the prior corresponding period that weren't repeated in FY 2021 and a solid performance across much of the business.

This strong performance allowed the NAB board to declare a fully franked final dividend of 67 cents per share, which brought the full year NAB dividend to $1.27 per share fully franked. This was up 112% on FY 2020's 60 cents per share dividend and represents a payout ratio of 63.7% of earnings.

NAB's Non-Executive Director and Chair, Philip Chronican, commented: "We are pleased to have increased dividends across the full year to 127 cents per share, compared to a reduced level in 2020. This outcome is closer to the level of shareholder return the Board is targeting going forward, with future dividends to be guided by a target payout ratio range of 65-75% of sustainable cash earnings, subject to circumstances at the time."

Eligible NAB shareholders can now look forward to being paid this dividend in exactly a month on 15 December.

The NAB share price is still up 27% in 2021 following today's decline.

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