Why is this ASX energy share diving 10% on Friday?

The company has been silent today but its shares are deep in the red. Here's why.

| More on:
A miner in visibility gear and hard hat looks seriously at an iPad device in a field where oil mining equipment is visible in the background.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Key points

  • TerraCom shares are ending the week on a sour note
  • Shares in the ASX energy player turned ex-dividend today
  • The company recently declared a bumper final dividend for FY22

The TerraCom Ltd (ASX: TER) share price is feeling the heat today.

While the S&P/ASX 200 Index (ASX: XJO) has edged 0.1% lower at the time of writing, the TerraCom share price has been crunched by 10.3% to sit at 91 cents.

Why the TerraCom share price is being smoked

Instead of ASX announcements or sector news driving this fall, the ASX energy share's tumble today likely comes down to one primary driver.

TerraCom shares are trading ex-dividend today. And the dividend in question is a juicy one.

When a company declares a dividend, it sets a cut-off date to determine which shareholders are eligible for the payment. This is known as the ex-dividend date.

If you purchase shares on or after this cut-off date, you don't receive the payment.

So, investors buying the ASX energy shares today won't be getting their hands on TerraCom's 10-cent FY22 final dividend.

The emerging resources explorer recently announced a bumper set of FY22 results. Revenue jumped 47% to $805 million while losses on the bottom line reversed to a $216 million profit.

What's more, TerraCom updated its dividend payout ratio. It's now intending to return between 60% and 90% of profits to shareholders in the form of quarterly dividends.  

The last time TerraCom paid a dividend was in 2019. 

Why do shares drop on the ex-dividend date?

When a company's shares turn ex-dividend, its share price typically drops. 

This is because the company is paying dividends out of its cash reserves. So, with its war chest of cash reduced, the value of the company is diminished.

What's more, some investors will look to offload shares once they've locked in the upcoming dividend. 

The extent of the share price fall usually mimics the size of the dividend. But it varies depending on sentiment and how the broader market is faring that day.

In the case of TerraCom, the dividend in question is 10 cents. At the time of writing, the TerraCom share price has fallen by 10.5 cents, slightly more than the dividend.

Which other shares are trading ex-dividend today?

You can see similar price action in Ampol Ltd (ASX: ALD) shares today. It's the first day that Ampol shares are trading without the company's 2022 interim dividend of $1.20. And at the time of writing, Ampol shares have tumbled by 5.2% or $1.75 to $31.91.

Base Resources Ltd (ASX: BSE) is another company coming under fire today. The Base Resources share price has slid 13.4% or 4.5 cents to 29 cents apiece as shares trade without a 2022 final dividend of 3 cents.

Motley Fool contributor Cathryn Goh has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. 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 Scott Phillips.

More on Resources Shares

A happy construction worker or miner holds a fistfull of Australian money, indicating a dividends windfall
Dividend Investing

Want to bank the Rio Tinto dividend? You'll need to be fast!

Rio Tinto is about to pay a hefty dividend.

Read more »

Miner holding cash which represents dividends.
Dividend Investing

A 22% yield on Fortescue shares? Here's how these passive income investors achieved it!

Fortescue shares are popular among passive income investors for their juicy fully-franked dividends.

Read more »

Miner looking at a tablet.
Resources Shares

How global job cuts could boost the BHP share price

The mining giant is planning cost-cutting to help its profits.

Read more »

Man with rocket wings which have flames coming out of them.
Share Gainers

This ASX All Ords stock just surged 88% in less than 3 days! Any guesses?

The ASX All Ords stock is drawing intense buying interest from investors this week.

Read more »

Scared looking people on a rollercoaster ride representing the volatile Mineral Resources share price in 2022
Resources Shares

How is the Fortescue share price down 3% today?

Shareholders should be cheering today's Fortescue losses.

Read more »

2 people at mining site, bhp share price, mining shares
Resources Shares

Why is the BHP share price trailing the ASX 200 on Tuesday?

BHP shares are underperforming the ASX 200 today.

Read more »

Image of young successful engineer, with blueprints, notepad and digital tablet, observing the project implementation on construction site and in mine.
Resources Shares

These ASX 200 mining stocks can deliver 20%+ returns

Analysts are tipping big returns from these miners.

Read more »

Miner looking at a tablet.
Mergers & Acquisitions

Alumina shares leap 8% on Alcoa takeover bid

ASX 200 investors are sending the Alumina share price soaring following confirmation of Alcoa’s takeover intentions.

Read more »