The Magellan Financial Group Ltd (ASX: MFG) share price has sunk 10.4% in morning trading. That compares to a drop of 0.88% for the S&P/ASX 200 Index (ASX: XJO).
What's going on with the fund manager? It has today given up all of the gains it experienced over the past month.
It may be important to remember there are a number of different things that can cause a share price to fall. Wider market negativity could cause some investors to sell shares. A decline could occur due to a negative update from the company. There's also the potential for a business to fall when it goes ex-dividend, particularly when the dividend yield is large.
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Magellan goes ex-dividend
The fund manager's board of directors declared a dividend of 68.9 cents per share for the six months to 30 June 2022, bringing total dividends for FY22 to $1.79 per share.
This dividend declaration came after a 3% fall in adjusted net profit after tax (NPAT) to $399.7 million and an 11% fall in profit before tax and performance fees of its funds management segment to $470.6 million.
Investors who buy shares from today onwards will no longer be entitled to the recently declared dividend of 68.9 cents per share.
As our ex-dividend explainer page points out, the ex-dividend can cause movement in a share price, as we've seen today with the Magellan share price:
A company's share price may increase in the lead-up to its ex-dividend date, as new investors may be willing to pay a premium to receive the dividend payment. Conversely, once the ex-dividend date has arrived, the share price may fall because the right to the dividend payment is no longer attached to purchases. Investors who purchased additional shares simply to receive the dividend may sell some or all of their shares, pushing the share price down.
With the Magellan share price down more than the dividend payment, that may explain some of what's happening. Keep in mind that the ASX 200 is also down 0.88% right now, so that may explain some of the larger-than-expected fall.
How does Magellan decide on its dividends?
Magellan has a dividend policy, subject to corporate legal and regulatory considerations.
It pays out interim and final dividends based on 90% to 95% of its net profit after tax of its funds management business, excluding crystallised performance fees.
Magellan also pays an annual performance fee dividend of 90% to 95% of its net crystallised performance fees after tax.
Magellan share price snapshot
The Magellan share price is down almost 40% in 2022.
