The Fortescue Metals Group Ltd (ASX: FMG) share price is falling heavily for a second session in a row.
In morning trade, the iron ore giant's shares are down almost 5% to $19.40.
Why is the Fortescue share price sinking?
Don't worry, today's weakness isn't because another member of the C-suite has resigned, nor has another broker slapped a sell rating on its shares.
The weakness in the Fortescue share price today has been driven by the miner's shares going ex-dividend this morning.
When a share goes ex-dividend, it means the rights to an upcoming dividend are now settled. As a result, anyone buying its shares today will not be entitled to receive this payout and its shares have dropped to reflect this. After all, you wouldn't want to pay for something you won't receive.
Fortescue dividend
If you're an eligible shareholder, then you can now look forward to receiving the upcoming Fortescue dividend later this month.
The mining giant plans to pay this fully franked $1 per share final dividend on 28 September.
Based on the Fortescue share price at the close of play on Friday, this final dividend equates to an attractive 4.9% dividend yield.
What's next?
Unfortunately, Goldman Sachs expects the dividend cuts to continue for the foreseeable future.
Goldman expects the miner to cut its dividend by more than 50% to 54 US cents (84 Australian cents) per share in FY 2024. After which, a cut to 36 US cents (56 Australian cents) per share is expected in FY 2025. Goldman commented:
We continue to think FMG is at an inflection point on capital allocation, and to fund the ambitious strategy, we assume the company raises ~US$6bn of new debt, reduces the dividend payout ratio from the current ~65% in 2H FY23 to ~50% from FY24 onwards (bottom end of the 50-80% guidance range), and increases gross gearing to >30% by FY27 (in-line with the company's target of 30-40%).
The broker has a sell rating and a lowly $13.80 price target on Fortescue's shares.
