The Bendigo and Adelaide Bank Ltd (ASX: BEN) share price is under pressure following the release of its full year results.
In morning trade, the regional bank's shares are down almost 10% to $10.05.
This is despite the Bendigo and Adelaide Bank dividend increasing strongly year on year.
Bendigo and Adelaide Bank share price lower despite dividend boost
Investors have been selling down the Bendigo and Adelaide Bank share price despite the bank delivering earnings and a final dividend ahead of the market's expectations.
In FY 2021, the bank reported cash earnings after tax of $457.2 million, which was up 51.5% year on year. This compares to the analyst consensus estimate of $433 million.
Also beating expectations was the Bendigo and Adelaide Bank dividend, which came in at 26.5 cents per share for the second half. This was ahead of the consensus estimate of 26 cents per share and brought its full year dividend to 50 cents per share.
This represents an increase of 41% year on year based on FY 2020's interim dividend of 31 cents per share and its deferred final dividend of 4.5 cents per share that was paid in March.
So why are its shares lower?
Given its strong earnings growth and the sizeable dividend increase, today's decline may have taken shareholders by surprise.
However, this decline appears to have been driven by margin weakness. The bank's net interest margin reduced by seven basis points on the prior corresponding period to 2.26%. It advised that this reflects significant growth in fixed lending and competitive new business rates.
And with management remaining cautious on the year ahead due to COVID-19, investors may be fearing that the Bendigo and Adelaide Bank dividend could be softer next year.
Though, time will tell if that is the case.
