Why is the Harvey Norman share price diving on Friday?

Shareholders can't complain about today's share price slump.

Sebastian Bowen

Author Bio Sebastian Bowen has been a Motley Fool contributor since late 2018. Sebastian found his passion for writing and educating others about shares and all things finance after completing his studies in political, economic and social science and enjoys bringing this passion to life at the Fool. His investment philosophy is a simple one – buying high-quality companies at prices that make sense. When he’s not researching his next investment at all hours of the morning, Sebastian enjoys classic movies and likes to unwind with a good book, newspaper or record. Areas of Expertise Dividend investing ETFs Education Bachelor of Political, Economic, and Social Sciences (Government and International Relations), University of Sydney Social Media X/Twitter Favorite Investment Quote "In the short run, the market is a voting machine, but in the long run, it is a weighing machine." – Benjamin Graham

Published March 31, 2023 11:33 am AEDT

The S&P/ASX 200 Index (ASX: XJO) looks like it is on track to record its fifth straight session of gains in a row for the week. At the time of writing, the ASX 200 has put on an additional 0.72%, which lifts the Index back above 7,170 points. But let's talk about a pretty conspicuous outlier in the Harvey Norman Holdings Ltd (ASX: HVN) share price.

Although the broader market is lifting today, Harvey Norman shares seemingly aren't playing ball. The famous ASX 200 retailer closed at $3.72 a share yesterday. But this morning, the company opened at just $3.59 a share and is currently going for $3.60, down a substantial 3.23% from where the company closed at yesterday.

So what's going on here? Why are investors seemingly punishing this ASX 200 share on a day when most ASX shares are rising in value?

$100 notes in a dishwasher, symbolising clean cash or money laundering — Image source: Getty Images

Harvey Norman share price plummets as shares trade ex-dividend

Well, they're not. Harvey Norman is falling today for perhaps the very best reason to have one of your shares fall in value. Today is the day Harvey Norman trades ex-dividend for its upcoming shareholder payment.

At the end of last month, Harvey Norman reported its latest half-year earnings for the six months to 31 December. It was a bit of a disappointing report, with the company revealing a 15.1% drop in profits after tax to $365.9 million, and an 8% decline in earnings before interest, tax, depreciation and amortisation (EBITDA) to just over $694 million.

This led to Harvey Norman announcing an interim dividend of 13 cents per share, fully franked. That represents a 35% decline on the interim dividend investors bagged last year, which was worth 20 cents per share, fully franked. It's also under the final dividend of 17.5 cents per share that investors received in November last year.

Nevertheless, today is the day that Harvey Norman has traded ex-dividend for this reduced payment. When an ASX share goes ex-dividend, it effectively cuts off any new investors in the company from receiving an upcoming dividend.

So everyone who owned Harvey Norman shares as of market close yesterday is eligible to receive the payment. Anyone who buys the shares from today onwards isn't.

This is why we tend to see a company's share price fall when it goes 'ex-div'. It reflects this inherent loss of value going forward.

So eligible shareholders can now look forward to receiving their latest dividend on 1 May.

At the current Harvey Norman share price, this dividend, combined with last year's final payment, gives this ASX 200 share a trailing dividend yield of 8.46%

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