The S&P/ASX 200 Index (ASX: XJO) once again appears to be on track for a positive day of returns for investors this Thursday. At the time of writing, the ASX 200 has put on a pleasing 0.53%, dragging the index up to just over 7,540 points. But the same can't be said of the Australian Foundation Investment Co Ltd (ASX: AFI), or AFIC for short, share price.
AFIC shares closed at $7.61 each yesterday. But today, the listed investment company (LIC) opened at just $7.46 a share. It is going for $7.48 at present, a fall of 1.71% so far.
So what's up with the AFIC share price? Why isn't this LIC enjoying the spoils of such a pleasant day on the share market?
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AFIC share price falls after trading ex-dividend
Well, there's a very easy and happy explanation. As we warned earlier this week, today is the day that AFIC shares have traded ex-dividend for the LIC's next dividend payment.
When a company declares a dividend payment, it must nominate a date that separates new investors from receiving the dividend before it is actually paid out.
This date is known as the ex-dividend date. Put simply, anyone who owned AFIC shares before today is eligible for the company's latest dividend. Anyone who buys AFIC shares from today onwards is not.
AFIC shares become notionally less valuable today (yesterday's shares came with a dividend, today's don't). As such, the value of the shares has fallen. This reflects this loss of value. It's a normal occurrence when any share trades ex-dividend.
But for those lucky investors who already owned AFIC shares prior to today's session? They can now look forward to receiving AFIC's interim dividend on 24 February later this month.
This interim dividend is the first one AFIC has raised in several years. Instead of the fully franked 10 cents per share investors bagged in 2022, AFIC will be doling out 11 cents per share in 2023.
This will take AFIC's trailing annual dividend to 25 cents per share after last August's final dividend of 14 cents per share. At the current AFIC share price, this gives the company a trailing dividend yield of 3.34%.
