Here's why the Medibank share price is falling hard on Wednesday

If you own Medibank shares, you'll be happy that the stock is falling heavily today.

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The S&P/ASX 200 Index (ASX: XJO) is having a pretty rough day so far this Wednesday. At the time of writing, the ASX 200 looks like it might just snap its winning streak this week, currently down by 0.77%. But let's talk about the Medibank Private Ltd (ASX: MPL) share price.

Medibank shares are doing far worse than the broader market today. Yesterday, the Medibank share price closed the trading day at $3.59 a share. But this morning, those same shares opened at just $3.50.

At present, this ASX 200 private health insurance giant is going for $3.48, down a hefty 3.06% from where it closed at yesterday.

So why is Medibank having such a rough time this Wednesday, especially in relation to what is happening on the wider ASX 200?

Why is the Medibank share price tanking on Wednesday?

Well, happily for investors, the answer is a pleasing one. It's ex-dividend day for the Medibank Private share price.

Last month, we covered Medibank's full-year earnings for the 2023 financial year. As we discussed at the time, these earnings saw Medibank reveal a 3.2% rise in revenues to $7.36 billion, along with a 12.8% increase in underlying net profit after tax (NPAT) to $500 million. Statutory NPAT rose even higher, shooting up 29.8% to $511 million.

This all enabled Medibank to announce a final (and fully franked) dividend of 8.3 cents per share for 2023, up 13.7% from last year's payment of 7.3 cents. The final dividend that Medibank paid before that one, back in 2021, only came in at 6.9 cents per share. So these payouts are certainly going in the right direction for investors.

However, yesterday marked the last day that investors could buy Medibank shares with the entitlement to this latest dividend attached. Today, the Medibank share price has traded ex-dividend for this payment, which means that anyone buying the shares from today onwards will miss out.

As is typical with a share trading ex-dividend, we have indeed seen a hefty share price drop in the Medibank share price today. This reflects this inherent loss of value from investors losing the eligibility for the upcoming dividend.

For eligible Medibank investors, 5 October has been set as the shareholder payday for this latest dividend – something to look forward to next month.

At the current Medibank share price, this ASX 200 share has a dividend yield of 4.19%.

Motley Fool contributor Sebastian Bowen 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.

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