The S&P/ASX 200 Index (ASX: XJO) seems to be gearing up for another tough day this Thursday. At the time of writing, the ASX 200 has slipped by 0.16% leaving the index at around 7,650 points. But let's talk about what's going on with the Medibank Private Ltd (ASX: MPL) share price.
On the surface, it looks as though Medibank shares are having an awful time today thus far. The private health insurance provider closed at $3.66 a share yesterday. But those same shares opened at $3.60 this morning, where they remain at present. That's a loss worth 1.64%.
Upon deeper inspection though, investors should be happy with this share price drop. That's because it is a consequence of Medibank shares trading ex-dividend today.
Last week, we covered Medibank's latest half-year earnings report, covering the six months to 31 December. As we discussed at the time, it was a fairly positive report card from Medibank Private.
The company announced that its revenue for the period rose by 3.3% up to $4.02 billion. Underlying profits rose by an even better 16.3% to $262.5 million, which enabled Medibank to unveil an interim dividend of 7.2 cents per share, fully franked, for the half-year.
This was a big announcement for the company. Firstly, this new dividend of 7.3 cents per share was a 14.3% rise over last year's interim dividend of 6.3 cents per share.
But this new payout is also set to be the largest interim dividend Medibank has ever paid out in its history as a public company. It takes Medibank's full-year payouts from 14.6 cents per share to 15.5 cents. That's including the final dividend of 8.3 cents per share that we saw last October.
Why are Medibank shares dropping this Thursday?
As we warned on Tuesday, yesterday was the last day you could have bought Medibank shares with the rights to receive this dividend attached.
Today, the company has just traded ex-dividend.
When a company trades ex-dividend, it cuts off new investors from eligibility for an upcoming shareholder payment. This means that Medibank shares have just become slightly less valuable, given new investors from today will have to wait until Medibank's second dividend of 2024 to start receiving income from the company.
So the resulting fall in share price that we are witnessing today is completely normal.
For eligible investors, Medibank's latest dividend is scheduled to arrive in bank accounts next month on 20 March.
At the current Medibank Private share price, this ASX 200 health insurer is trading on a dividend yield of 4.31%.
