Why is the NAB share price tumbling 4% on Wednesday?

Woman looking at her smartphone and analysing share price.

Woman looking at her smartphone and analysing share price.

The S&P/ASX 200 Index (ASX: XJO) is having another weak day on the ASX boards so far this Wednesday, building from yesterday’s losses. At the time of writing, the ASX 200 has slipped by 0.28%, dragging the index down to around 7,240 points. I guess investors weren’t too impressed with the Budget last night. But let’s talk about the National Australian Bank Ltd (ASX: NAB) share price.

NAB shares are seemingly having a real shocker today. This ASX 200 big four bank share closed at $27.36 a share yesterday. But this morning, NAB opened at just $26.17 and is presently going for $26.19 a share, down a notable 4.28%.

Most ASX bank shares are having a poor showing this Wednesday. But not on the same kind of scale as the NAB share price. Commonwealth Bank of Australia (ASX: CBA) shares are currently down by 0.45%. ANZ Group Holdings Ltd (ASX: ANZ) shares have lost 0.67%, while the Westpac Banking Corp (ASX: WBC) share price is down by 0.14%.

So why might NAB shares be suffering so much more than both the broader market and other ASX 200 bank shares today?

Well, the answer is a simple and comforting one for shareholders: today is ex-dividend day for NAB.

NAB share price falls as investors lock in latest dividend

It was only last week that NAB revealed the details of its latest shareholder payout. As part of its half-year earnings report, NAB announced an interim dividend worth 83 cents per share, fully franked.

That represents a substantial increase over last year’s interim dividend of 73 cents per share, as well as the final dividend of 78 cents per share that investors enjoyed back in December.

When any ASX dividend share declares a dividend, it must also identify an ex-dividend date preceding it. This is the date when eligibility for the latest dividend is cut off. For NAB, this is today. This means that any investor who owned NAB shares as of yesterday afternoon will receive the bank’s latest dividend. But for anyone who buys NAB shares from today onwards, you miss out.

But there are no free lunches on the ASX. So because NAB shares don’t come with this dividend attached, as of today, their intrinsic value has fallen. That’s why we are seeing such a steep drop in the NAB share price this Wednesday. It’s the ASX’s typical reaction to a big dividend payer trading ex-dividend.

Eligible NAB investors can now look forward to receiving this latest dividend in around two months’ time on 5 July.

Right now, the NAB share price is offering a forward dividend yield (including the July payment) of 6.14%, or 8.77% grossed-up with this ASX 200 bank’s full franking credits.

The post Why is the NAB share price tumbling 4% on Wednesday? appeared first on The Motley Fool Australia.

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Motley Fool contributor Sebastian Bowen has positions in National Australia Bank. 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 recommended Westpac Banking Corporation. 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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