The S&P/ASX 200 Index (ASX: XJO) has kicked off this Friday's trading on a shaky note. At the time of writing, the ASX 200 has slipped a tentative 0.05% to just over 7,353 points. But let's talk about the Australian Foundation Investment Co Ltd (ASX: AFI), or AFIC, share price.
This venerable listed investment company (LIC) closed at $7.27 a share yesterday. But this morning, AFIC shares opened at just $7.06 each and are currently trading at $7.04, down a hefty 2.36%.
This is a highly unusual move for the AFIC share price. After all, this conservative LIC holds a portfolio of blue-chip ASX 200 shares. As such, its share price tends to move up and down more or less alongside what the broader markets are doing. So why are AFIC shares underperforming the markets by more than 2% this Friday?
Well, it's for a reason that most investors would actually welcome. As we warned yesterday, today is AFIC's ex-dividend date for its upcoming final dividend.
Image source: Getty Images
AFIC share price falls as LIC trades ex-dividend
When a company announces a dividend, it must also select an ex-dividend date to precede the payment date. This date effectively cuts off new investors from receiving the dividend. So if you owned AFIC shares as of yesterday's close, you are in line for the LIC's latest payout. If you bought shares this morning though (or buy them from now on), you miss out this time.
As such, AFIC shares inherently became less valuable overnight as they, as of today, now do not come with the rights to this latest dividend. That's why we are seeing such an obvious (and seemingly unprovoked) fall in the AFIC share price today. It's a very normal reaction for an ASX share to have upon trading ex-dividend.
AFIC announced its latest final dividend back on 26 July, which we covered at the time. Investors will receive a payment of 14 cents per share, fully franked, in exactly three weeks from today, on 1 September next month.
This happens to be the eleventh year in a row that AFIC has paid out a final dividend of 14 cents per share. Yep, investors got exactly the same payout back in August of 2013.
That might have come as something of a disappointment for AFIC investors, who were treated to a dividend pay rise six months ago when AFIC paid out an interim dividend of 11 cents per share. That was 10% above the 10 cents investors got last year.
On current pricing, AFIC shares remain down by 5.6% in 2023 to date, as well as by 11.3% over the past 12 months:
Right now, the AFIC share price has both a trailing and forward dividend yield of 3.55%.
