The Commonwealth Bank of Australia (ASX: CBA) share price is out of form on Wednesday.
In morning trade, the banking giant's shares are down over 2% to $136.51.
This compares to a 0.45% decline by the ASX 200 index today.
Image source: Getty Images
Why is the CBA share price under pressure?
While investors never like to see a share price drop into the red, today's decline could arguably be described as good news for shareholders.
That's because the CBA share price is falling today because it is going ex-dividend for its latest dividend. This means pay day isn't far away.
When a share trades ex-dividend, it means the rights to the payout are now settled. As a result, anyone buying CBA's shares today won't be entitled to receive the dividend when it is paid. Instead, the dividend will end up in the bank account of the seller of its shares, even though they won't own them on pay day.
In light of this, a share price will usually drop in line with the value of the dividend to reflects this. After all, you wouldn't want to pay for something you won't receive, and a dividend forms part of a company's valuation.
The CBA dividend
As a reminder, last week CBA released its FY 2024 results and reported flat operating income of $27.174 billion and a 2% decline in cash net profit after tax to $9.836 billion. The latter went down well with the market, which was expecting a profit of $9.783 billion for FY 2024.
Also coming in ahead of expectations was the bank's fully franked final dividend.
The CBA board declared a final dividend of $2.50 per share, which brought its total dividends for FY 2024 to $4.65 per share. This was a 3% increase year on year and was ahead of the consensus estimate of $4.55 per share.
The good news is that it won't be too long until pay day for eligible CBA shareholders. Australia's largest bank is scheduled to pay the $2.50 per share fully franked dividend late next month on 27 September.
What's next?
According to a note out of Goldman Sachs, its analysts expect the CBA dividend to be maintained at $4.65 per share for the foreseeable future.
It has pencilled in the same dividend in FY 2025, FY 2026, and FY 2027. This will mean fully franked dividend yields of 3.6% each year for the next three years.
