The South32 Ltd (ASX: S32) share price has taken a tumble on Thursday.
In morning trade, the mining giant's shares are down over 7% to $3.99.
Why is the South32 share price is tumbling?
The good news for shareholders is that the weakness in the South32 share price on Thursday has nothing to do with another market selloff or a commodity price collapse. Instead, it is almost entirely due to the company's shares trading ex-dividend this morning for its latest dividend.
When a share trades ex-dividend, it means that the rights to an upcoming dividend payment now belong to the current holder of the shares and won't transfer to buyers.
As a result, a company's share price will usually fall in line with the dividend to reflect this. After all, you wouldn't want to pay for something that you won't be receiving.
The South32 dividend
Last month when South32 released its full year results, the company declared a fully franked final dividend of 14 US cents per share and a fully franked special dividend of 3 US cents per share.
Combined, this equates to a fully franked ~25.2 cents per share dividend in local currency, which represents a 5.8% dividend yield based on the South32 share price at yesterday's close.
These dividends will be paid to eligible shareholders on 13 October.
Should you invest?
The team at Morgans are very positive on the South32 share price. Late last month, the broker put an add rating and $5.50 price target on the company's shares.
This implies potential upside of 38% for investors over the next 12 months. The broker commented:
We see attractive long-term value potential in S32 from de-risking of its growth portfolio, the potential for further portfolio changes, and an earnings-linked dividend policy.
