The Westpac Banking Corp (ASX: WBC) share price is falling on Thursday morning.
In early trade, the banking giant's shares are down a disappointing 2.5% to $31.46.
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Why is the Westpac share price falling?
The weakness in the bank's share price today could actually be classed as good news for its shareholders.
That's because the Westpac share price is underperforming today in response to trading ex-dividend for the big four bank's upcoming final dividend payment. This means that pay day is just around the corner for its shareholders.
What is ex-dividend?
When a company's shares go ex-dividend, it means that the rights to an upcoming dividend payment are now locked in. As a result, any investors that are buying Westpac's shares from this point on will not be entitled to receive this payout when it is distributed to shareholders.
Instead, the rights to the dividend remain with the seller, even though they no longer own those shares when the payment date arrives.
And given that a dividend is part of a company's valuation, its share price will tend to drop in line with the value of the payout on the ex-dividend date. After all, new buyers of its shares don't want to pay for something they will not receive.
In the case of Westpac, earlier this week it released its full-year results and declared its latest dividend.
Westpac reported a 3% decline in net profit after tax to $6.99 billion for the 12 months ended 30 September. However, this earnings decline couldn't stop the Westpac board from increasing its dividend to a fully franked $1.66 per share.
This comprises an interim and special dividend totalling 90 cents per share and a final dividend of 76 cents per share.
It is the latter that eligible shareholders can now look forward to being paid. Westpac has named 19 December as its payment date, which means shareholders will receive their payout just in time for some last minute Christmas shopping.
What's the outlook for the Westpac dividend in FY 2025 and FY 2026?
According to a note out of Morgans this week, its analysts expect fully franked dividends of $1.53 per share in FY 2025 and then $1.66 per share in FY 2026.
Based on its current share price of $31.46, this will mean dividend yields of 4.9% and 5.3%, respectively, for investors picking up its shares on Thursday.
Morgans currently has a hold rating and $27.66 price target on Westpac's shares.
