The Fortescue Metals Group Limited (ASX: FMG) share price has come under pressure on Monday and is one of the worst performers on the S&P/ASX 200 Index (ASX: XJO).
At the time of writing the iron ore producer’s shares are down 7.5% to $17.45.
Why is the Fortescue share price sinking lower?
Today’s decline is entirely attributable to Fortescue’s shares trading ex-dividend this morning, rather than anything operational.
When a company trades ex-dividend, it means its shares are trading without the rights to an upcoming dividend payment. In light of this, new buyers of its shares are unwilling to pay for a dividend they won’t receive and the share price will fall accordingly.
In respect to Fortescue, this morning the company’s shares traded ex-dividend for its final fully franked $1.00 per share dividend.
Based on its last close price of $18.87, this dividend represents a generous yield of 5.3%.
And while its shares have fallen more than this, I suspect that there is likely to be an element of profit taking going on today. Especially given its incredible share price gain in 2020.
Prior to today, Fortescue’s shares were up a remarkable 75% since the start of the year. This has been driven by the combination of a strong rise in the iron ore price, record shipments, and its improving grades.
The good news for shareholders is that the iron ore price is showing no signs of weakening. According to CommSec, on Friday the spot iron ore price rose by US$2.05 or 1.7% to US$123.25 a tonne. This compares very favourably to its C1 costs of US$12.94 per wet metric tonne.
If prices remain at this level over the remainder of FY 2021, another impressive result is likely.
Other shares trading ex-dividend.
Fortescue isn’t the only ASX share trading ex-dividend this morning.
Also falling for the same reason are the shares of personal care products company Ansell Limited (ASX: ANN) and waste management company Bingo Industries Ltd (ASX: BIN).
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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. 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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