Why is this ASX energy share diving 10% on Friday?

The TerraCom Ltd (ASX: TER) share price is feeling the heat today.

While the S&P/ASX 200 Index (ASX: XJO) has edged 0.1% lower at the time of writing, the TerraCom share price has been crunched by 10.3% to sit at 91 cents.

Why the TerraCom share price is being smoked

Instead of ASX announcements or sector news driving this fall, the ASX energy share’s tumble today likely comes down to one primary driver.

TerraCom shares are trading ex-dividend today. And the dividend in question is a juicy one.

When a company declares a dividend, it sets a cut-off date to determine which shareholders are eligible for the payment. This is known as the ex-dividend date.

If you purchase shares on or after this cut-off date, you don’t receive the payment.

So, investors buying the ASX energy shares today won’t be getting their hands on TerraCom’s 10-cent FY22 final dividend.

The emerging resources explorer recently announced a bumper set of FY22 results. Revenue jumped 47% to $805 million while losses on the bottom line reversed to a $216 million profit.

What’s more, TerraCom updated its dividend payout ratio. It’s now intending to return between 60% and 90% of profits to shareholders in the form of quarterly dividends.  

The last time TerraCom paid a dividend was in 2019. 

Why do shares drop on the ex-dividend date?

When a company’s shares turn ex-dividend, its share price typically drops. 

This is because the company is paying dividends out of its cash reserves. So, with its war chest of cash reduced, the value of the company is diminished.

What’s more, some investors will look to offload shares once they’ve locked in the upcoming dividend. 

The extent of the share price fall usually mimics the size of the dividend. But it varies depending on sentiment and how the broader market is faring that day.

In the case of TerraCom, the dividend in question is 10 cents. At the time of writing, the TerraCom share price has fallen by 10.5 cents, slightly more than the dividend.

Which other shares are trading ex-dividend today?

You can see similar price action in Ampol Ltd (ASX: ALD) shares today. It’s the first day that Ampol shares are trading without the company’s 2022 interim dividend of $1.20. And at the time of writing, Ampol shares have tumbled by 5.2% or $1.75 to $31.91.

Base Resources Ltd (ASX: BSE) is another company coming under fire today. The Base Resources share price has slid 13.4% or 4.5 cents to 29 cents apiece as shares trade without a 2022 final dividend of 3 cents.

The post Why is this ASX energy share diving 10% on Friday? appeared first on The Motley Fool Australia.

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More reading

• 5 things to watch on the ASX 200 on Friday
• Here are 5 ASX 200 shares going ex-dividend tomorrow
• TerraCom share price rockets on 900% dividend upgrade
• ASX falls, eyes on the Fed and huge petrol profits. Scott Phillips on Nine’s Late News
• Here are the top 10 ASX 200 shares today

Motley Fool contributor Cathryn Goh 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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