Why is the BHP share price sinking today?

Woman in yellow hard hat and gloves puts both thumbs down

Woman in yellow hard hat and gloves puts both thumbs down

The BHP Group Ltd (ASX: BHP) share price is taking a tumble on Thursday morning.

In early trade, the mining giant’s shares are down almost 3% to $46.37.

Why is the BHP share price sinking?

Thankfully, the BHP share price isn’t tumbling today because of significant iron ore price weakness or the release of a disappointing update.

Today’s decline could actually be considered a positive for shareholders. That’s because the Big Australian’s shares are falling after trading ex-dividend for its next dividend payment, which means payday is just around the corner.

What does ex-dividend mean?

When a company’s shares trade ex-dividend, it means that any new shareholders from that day on will not be entitled to receive the upcoming payment.

Instead, the rights to that dividend payment will remain with shareholders who held the shares at the market close the day before the ex-dividend date (yesterday). That’s even if they sell the shares between now and the payment date.

As a result of this, the BHP share price has declined to reflect this. After all, if you were buying its shares, you wouldn’t want to pay for something that you’re not going to receive.

The BHP dividend

Last month, when BHP released its half-year results, the mining giant reported underlying EBITDA of US$13,230 million. This was down 28% on the prior corresponding period due to weaker iron ore prices and cost pressures.

Understandably, this led to the BHP board cutting its fully franked interim dividend by 40% to 90 US cents per share (A$1.306 per share). This represents a total return of US$4.6 billion and is the equivalent to a 69% payout ratio.

Eligible shareholders won’t have to wait long to receive this dividend. It is scheduled to be paid towards the end of the month on 30 March.

The post Why is the BHP share price sinking today? appeared first on The Motley Fool Australia.

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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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