Why is the CBA share price sliding on Wednesday?

CBA shares are falling today, but shareholders will be happy about it.

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It's looking like another dreary day for ASX shares and the S&P/ASX 200 Index (ASX: XJO) so far this Wednesday. At present, the ASX 200 has lost a depressing 0.62%, falling back below 7,300 points. But that's nothing against the seemingly nasty fall of the Commonwealth Bank of Australia (ASX: CBA) share price. 

CBA shares closed at $101.52 each yesterday. But this morning, the ASX 200's largest bank share opened at just $98.70 and is going for $98.95 at the time of writing, down what would be a nasty 2.53% so far today:

But investors shouldn't get into a twist over these losses. That's because there's a very good reason CBA shares are dropping so dramatically today. The bank has just traded ex-dividend for its next shareholder payment.

Earlier this month, CBA reported its latest earnings, covering the first half of FY2023. The bank gave investors some pleasing metrics to look over, including a 9% rise in cash net profit to $5.15 billion, as well as a 12% lift to operating income to $13.59 billion.

But many investors own CBA shares solely for that big four bank dividend. And the Commonwealth Bank didn't disappoint in that arena.

CBA share price slides on largest interim dividend ever

The bank declared that its first dividend of 2023 would be worth $2.10 per share, fully franked. That was a pleasing hike over 2022's interim dividend of $1.75 per share. This year's payment is the largest-ever interim dividend to come out of CBA.

But with a dividend comes an ex-dividend date. And that date is today. This means that from this Wednesday, any new shareholders of CBA are now ineligible to receive this latest dividend payment.

As such, CBA shares have just become nominally less valuable – the company's shares came with a dividend yesterday, but not today. That's why we are seeing a big drop in the CBA share price. This is a normal occurrence when a dividend share trades ex-dividend – there's no free lunch here.

So eligible investors can now look forward to receiving this latest dividend from CBA next month on 30 March. But they have until this Friday, 24 February, to opt for the optional dividend reinvestment plan (DRP) if they so wish. This gives investors the option of receiving additional CBA shares in lieu of the normal dividend cash payment.

At the current CBA share price, this ASX 200 bank share now has a dividend yield of 4.25%.

Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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