The market may be a sea of red today, but few shares are falling as heavily as Fortescue Ltd (ASX: FMG).
In morning trade, the iron ore giant's shares are down 9% to a new 52-week low of $16.07.
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Why are Fortescue shares crashing?
There are a couple of reasons why the miner's shares are crashing deep into the red on Wednesday.
One is a broad market selloff which is weighing heavily on the mining sector. This has seen the likes of BHP Group Ltd (ASX: BHP), Rio Tinto Ltd (ASX: RIO), and South32 Ltd (ASX: S32) shares drop into the red today.
The other reason that Fortescue's shares are under significant pressure today is its upcoming dividend payment.
This morning, the company's shares are going ex-dividend for its fully franked final dividend for FY 2024.
When this happens, it means the rights to the dividend are settled and new buyers of its shares will not be entitled to receive it on pay day. As a result, a share price will tend to fall in line with the value of the dividend to reflect this.
After all, a dividend forms part of a company's valuation, and you wouldn't want to pay for something that you won't receive.
The Fortescue dividend
Last month, Fortescue released its full year results for FY 2024 and reported an 8% increase in revenue to US$18,220 million and an 18% jump in net profit after tax to US$5,664 million.
This allowed the miner to increase its total fully franked dividends by 12.6% to $1.97 per share for the year. This comprises an interim dividend of 108 cents per share and a final dividend of 89 cents per share. It is the latter that Fortescue's shares are going ex-dividend for this morning.
Based on yesterday's close price, this final dividend represented a fully franked 5% dividend yield.
When is pay day?
The good news for eligible shareholders is that it won't be long until this juicy dividend is paid to them.
Fortescue is scheduled to make its dividend payment in a touch over three weeks on 27 September.
Should you buy the dip?
Despite Fortescue's shares crashing to a 52-week low today, a number of brokers still believe they are overvalued.
One of those is Macquarie, which has an underperform rating and $14.25 price target on them. Based on its current share price, this implies potential downside of approximately 11%.
