Why is the New Hope share price sinking on Monday?

What's going on with this coal miner's shares?

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The New Hope Corporation Ltd (ASX: NHC) share price is falling sharply on Monday.

In morning trade, the coal miner's shares are down more than 5% to $4.58.

Why is the New Hope share price sinking?

While the market may be a sea of red on Monday, that's not the reason New Hope's shares are sinking this morning.

In fact, you could argue that today's decline is actually good news for the miner's shareholders.

That's because the reason New Hope's shares are falling today is because they are trading ex-dividend for its upcoming payout.

A company's share price will tend to fall when it trades ex-dividend. This is because it means the rights to an impending dividend payment have been settled and new buyers won't be entitled to receive it.

In light of this, a share price will fall to reflect this. After all, a dividend makes up part of a company's valuation. So, if you're not going to receive it, you wouldn't want to pay for it when buying shares.

The New Hope dividend

Last month, New Hope released its half-year results for the six months ended 31 January.

The company reported a 45.9% decline in revenue to $856.6 million and a 59% reduction in EBITDA to $424.8 million. This was driven by a 58% decline in its average realised price to A$197 per tonne and an 11% increase in cash costs, which was slightly offset by hedging and a 28% lift in saleable coal production.

Given its profit decline, the New Hope board was forced to cut its fully franked interim dividend by 57% to 17 cents per share.

However, based on Friday's New Hope share price of $4.85, this still equates to a very attractive 3.5% dividend yield. And there's still a final dividend to come in six months!

It is this dividend that its shares have traded ex-dividend for this morning.

When is payday?

If you're an eligible shareholder, then you can now look forward to being paid New Hope's dividend in the coming weeks. It is scheduled to pay the 17 cents per share dividend on 1 May.

After which, a recent note out of Morgans reveals that its analysts expect a slightly larger dividend to be declared later this year.

Its analysts are forecasting a fully franked final dividend of 18 cents per share with its full-year results in September. This will bring New Hope's total dividends to 35 cents per share for FY 2024, which is the equivalent of a 7.2% dividend yield based on Friday's closing share price.

Motley Fool contributor James Mickleboro 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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