Why is the BHP share price falling today?

Today's decline could actually be good news for the miner's shareholders.

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The BHP Group Ltd (ASX: BHP) share price is falling on Thursday.

In morning trade, the mining giant's shares are down almost 1% to $39.25.

A male investor wearing a blue shirt looks off to the side with a miffed look on his face as the share price declines.

Image source: Getty Images

Why is the BHP share price falling?

While you never want to see shares you own falling, today's decline is arguably a positive for shareholders.

That's because it has been caused by the Big Australian's shares going ex-dividend this morning for its upcoming interim dividend.

When a company's shares go ex-dividend, it means that the rights to an impending dividend are locked in. As a result, new buyers of those shares won't be eligible to receive its payout when pay day comes around.

As a dividend forms part of a company's valuation, a share price will tend to drop in line with the value of the dividend on the ex-dividend date to reflect this. After all, you wouldn't want to pay for something that you won't receive.

What dividend is BHP paying? Let's find out.

The BHP dividend

When BHP released its half-year results last month, it revealed a disappointing 23% decline in underlying attributable profit to US$5.1 billion. This was driven largely by a decline in realised iron ore and steelmaking coal prices, which offset higher realised copper prices.

Also falling was its free cash flow. BHP generated free cash flow of US$2.6 billion for the half, which was down 30% on the prior corresponding period. Management advised that this was due to its lower earnings and a 10% increase in capital and exploration expenditure.

In light of this, the BHP board decided to cut its fully franked interim dividend by 30.5% to an eight-year low of 50 US cents per share. At current exchange rates this represents a 79 Australian cents per share dividend.

Based on the BHP share price at yesterday's close, this equates to a relatively attractive 2% dividend yield for investors.

This means that a $20,000 investment would pull in $400 of income from this interim dividend on pay day. But when is that?

BHP intends to pay this dividend to eligible shareholders in three weeks on 27 March.

After which, Goldman Sachs is forecasting a 52 US cents per share final dividend with its full year results in August. This will bring its total dividends to 102 US cents per share or 161 Australian cents for FY 2025. This represents a 4.1% dividend yield.

Goldman currently has a buy rating and $47.40 price target on BHP's shares.

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 positions in and has recommended Goldman Sachs Group. The Motley Fool Australia has recommended BHP Group. 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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