Why the Fortescue (ASX:FMG) share price is sinking 6% today

Here’s why the Fortescue Metals Group Limited (ASX:FMG) share price has come under pressure and is sinking lower on Monday morning…

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The Fortescue Metals Group Limited (ASX: FMG) share price has come under pressure on Monday.

In morning trade, the iron ore producer’s shares are down 6% to $22.72.

Why is the Fortescue share price sinking today?

The good news for shareholders is that today’s decline has nothing to do with the company’s performance or the iron ore price.

This decline is entirely attributable to the fact that the Fortescue share price is trading ex-dividend today.

When a share trades ex-dividend, it means that it is trading without the rights to an upcoming dividend. In light of this, anyone buying shares from between now and the dividend payment date, will not be receiving the distribution.

As a result, a share price will generally drop in line with the dividend being paid to reflect this.

The Fortescue dividend

Last month Fortescue released its half year results and revealed a 44% increase in revenue to US$9,335 million and a 66% lift in net profit after tax to US$4,084 million.

This strong form allowed the Fortescue board to declare a fully franked interim dividend of $1.47 per share, up a massive 93.4% on the prior corresponding period.

Based on the Fortescue share price at Friday’s close, this interim dividend represents a 6% yield. This is roughly in line with the drop its shares have made this morning.

Eligible shareholders can now look forward to being paid this monster dividend in just over three weeks on 24 March.

Other shares going ex-dividend

Fortescue isn’t the only company that has shares going ex-dividend this morning.

Also trading ex-dividend are Credit Corp Group Limited (ASX: CCP) shares, Evolution Mining Ltd (ASX: EVN) shares, and Worley Ltd (ASX: WOR) shares.

As with Fortescue, these three shares are also trading lower on Monday morning.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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