It's been a bumpy start to this Wednesday's trading for the S&P/ASX 200 Index (ASX: XJO) and ASX shares. At the time of writing, the ASX 200 has entered red territory, currently down 0.23% at around 7,645 points. That's after the index initially opened in the green. But let's talk about the Fortescue Ltd (ASX: FMG) share price.
At first glance, it looks as though this famous ASX 200 mining stock is having an unexpectedly brutal day so far.
Fortescue shares closed at $27.52 each yesterday afternoon. But this morning, those same shares opened at $26.92 and are currently trading at $26.72 at the time of writing. That's a loss worth 2.91%. It was even worse for Fortescue earlier this morning as well. We saw the miner get as low as $26.57 – a loss of 3.45% at the time.
So what on earth is going on with the Fortescue share price this Wednesday? It does seem a little unfair, given that Fortescue's mining peers like BHP Group Ltd (ASX: BHP) and Rio Tinto Ltd (ASX: RIO) are up by numbers like 0.34% and 1.2% so far today.
Well, Fortescue shareholders have nothing to complain about. Fortescue shares are falling today for what is arguably the best reason a company can fall in value. Its shares have just traded ex-dividend.
Image source: Getty Images
Fortescue share price drops as new investors shut out from upcoming dividend
Last week, we covered Fortescue's latest half-year earnings. At the time, investors were impressed by Fortescue's 21% rise in revenues, 36% spike in underlying earnings, and 41% surge in net profits that was reported for the six months to 31 December.
But the metric most relevant to today's share price falls was the 44% increase that Fortescue announced for its next interim dividend. Yep, the company revealed that shareholders will be treated with an interim dividend worth a stonking $1.08 per share, fully franked, on 27 March next month.
That looks pretty compelling compared to Fortescue's last interim dividend from 2023, which was worth just 75 cents per share. Last year's September final dividend came in at around $1 per share (also fully franked).
However, eligibility for this dividend has now closed. As we reported on Monday, the last day investors could buy Fortescue shares with the rights to this upcoming dividend attached was yesterday. Today, Fortescue shares have now lost the value of this payment, thanks to the company trading ex-dividend.
So if you buy Fortescue shares from today onwards, you'll have to wait until the company (presumably) forks out its final dividend later this year.
So it's no wonder why we are seeing such a drastic decline in the value of the Fortescue share price this Wednesday. It's a very normal occurrence when a company trades ex-dividend. Particularly a generous income payer like Fortescue.
At the current Fortescue share price, this ASX 200 mining giant now trades on a dividend yield of 7.78%.
