The Insurance Australia Group Ltd (ASX: IAG) share price is heading south on Thursday afternoon.
At the time of writing, the insurance giant's shares are down 2.15% to $4.55.
Let's take a look at what's going on with IAG.
Image source: Getty Images
Why are IAG shares in reverse today?
Following the release of the company's full-year results last week, investors are eyeing IAG shares as they go ex-dividend today.
The ex-dividend date is particularly important as it determines which shareholders will receive the company's latest dividend.
If you held IAG shares at yesterday's market close, you will be eligible for the final dividend.
However, if you didn't own them and bought them today, the dividend will go to the seller.
Historically, when a company reaches its ex-dividend day, its shares tend to fall in proportion to the dividend paid out. This is because investors tend to sell off the company's shares after securing the dividend.
What does this mean for IAG shareholders?
For those eligible for the IAG dividend, you'll receive a payment of 5 cents per share on 22 September. The dividend is partially franked.
Notwithstanding COVID-19, this is the smallest dividend that will be paid out to shareholders for more than a decade. In case you were wondering, the previous final dividend stood at 13 cents per share.
This brings the full-year dividend to 11 cents apiece, which equates to a payout of 78.1% on reported net profit after tax (NPAT). IAG's dividend policy in future years is to distribute between 60% and 80% of NPAT, excluding any after-tax earnings impact.
Are IAG shares a buy now?
Following the company's financial scorecard, one broker weighed in on the IAG share price.
According to ANZ Share Investing, analysts at Morgans downgraded its rating to 'hold' from 'add' for IAG. Furthermore, it also cut the price target by 2.8% to $4.95 per share.
That suggests an upside of almost 9% on the current share price.
IAG share price snapshot
Looking at the past 12 months, the IAG share price has fallen 14% on the back of difficult trading conditions.
In contrast, the S&P/ASX 200 Financials (ASX: XFJ) sector has dipped by around 4% over the same timeframe.
IAG shares reached a decade low of $4.02 on 17 June as volatility hit global markets. Since then, it has climbed around 13%.
IAG commands a market capitalisation of roughly $11.29 billion and has a dividend yield of 4.21%.
