The National Australia Bank Ltd (ASX: NAB) share price is starting the week in the red.
In morning trade, the banking giant's shares are down over 2% to $35.71.
This is despite the ASX 200 index pushing higher this morning.
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Why is the NAB share price sinking?
The weakness in the bank's share price today has nothing to do with a bad update or a broker downgrade.
In fact, today's decline could be classed as good news for the big four bank's shareholders.
That's because the NAB share price is falling in response to trading ex-dividend for the bank's upcoming interim dividend payment.
This means that payday is approaching for eligible shareholders!
Going ex-dividend
When a company's shares go ex-dividend, it means that the rights to an upcoming dividend payment are now settled. As a result, anyone buying shares from this point will not be entitled to receive this payout when it is made.
Instead, the rights to the dividend will remain with the seller, even though they will no longer own those shares when the payment date arrives.
And given that a dividend forms 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 don't want to pay for something they won't receive.
The NAB dividend
Last week, NAB released its half-year results and reported net operating income of $10,281 million and cash earnings of $3.58 billion. This was up 1.4% and 1%, respectively, year on year.
Management revealed that its top and bottom line growth was driven by higher Markets and Treasury (M&T) income, which offset lower margins.
This saw the NAB board elect to keep its interim dividend flat on the previous half at a fully franked 85 cents per share. It is this dividend that NAB's shares are going ex-dividend for this morning.
Eligible shareholders can now look forward to being paid this dividend in around seven weeks on 2 July.
What's next for the NAB dividend?
A note out of Macquarie reveals that its analysts expect another 85 cents per share fully franked final dividend from NAB later this year. This will bring its total dividends for FY 2025 to $1.70 per share.
After which, the broker expects the NAB board to keep its dividend on hold at this level for FY 2026.
However, it is then forecasting a reasonably large cut in FY 2027. For that financial year, the broker expects NAB to pay a fully franked $1.50 per share dividend. This represents a cut of almost 12%.
Macquarie currently has a neutral rating and $35.00 price target on its shares.
