The Fortescue Metals Group Ltd (ASX: FMG) share price is having a day to forget on Monday.
In morning trade, the iron ore minerâs shares are down a sizeable 8% to $20.60.
This compares to a 0.8% decline by the benchmark S&P/ASX 200 Index (ASX: XJO).
Why is the Fortescue share price being sold off?
There are a couple of catalysts for the poor performance of the Fortescue share price on Monday.
The first is broad weakness in the resources sector, which has seen fellow miners BHP Group Ltd (ASX: BHP) and Rio Tinto Ltd (ASX: RIO) fall approximately 2% today. This appears to have been driven by a pullback in the price of commodities on Friday evening.
However, the main reason for the Fortescue share price decline has been the companyâs upcoming dividend payment.
Going ex-dividend
This morning, Fortescue has traded ex-dividend for its fully franked interim dividend of A$0.75 per share.
When a share trades ex-dividend, it means that the rights to an upcoming dividend payment are now with the owners or sellers of its shares and new buyers wonât receive it. In light of this, a share price will tend to fall in line with the dividend to reflect this fact.
In addition, sometimes a share will fall even more than its dividend payment if some shareholders were planning to wait for the ex-dividend date before closing their positions.
This could explain why the Fortescue share price is falling significantly more than the value of its upcoming dividend payment today. After all, with the Fortescue dividend tipped to reduce materially in the coming years, some income investors may believe that now is the time to get out.
Whether you sold out or not today, those that are eligible can look forward to receiving this 75 cents per share dividend next month on 29 March.
The post Why is the Fortescue share price sinking 8% today? appeared first on The Motley Fool Australia.
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More reading
- Why are ASX 200 mining shares ending the week in the red?
- 7 ASX 200 shares with ex-dividend dates next week
- Hoping to bag the next Fortescue dividend? You’d better hurry
- Fortescue shares: Bull vs. Bear
- Why has the Fortescue share price hit a new 52-week high today?
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 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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