With the S&P/ASX 200 Index (ASX: XJO) closing down 3% today, the kind of fall we haven’t seen for more than a year, it would be natural to expect at least a commensurate drop in the BHP Group Ltd (ASX: BHP) share price. After all, BHP is now the largest share on the ASX 200 by market capitalisation, and by a mile too. That means it has an equally-large weighting and influence on the movements of the ASX 200 Index.
But the BHP share price has today fallen by more than double the broader market. BHP shares have closed at a share price of $44.77 each. That’s a whopping drop of 6.92% against yesterday’s closing share price.
It’s likely that the ASX 200 is losing so much steam today thanks to the escalation of the Russia-Ukraine crisis we have unfortunately seen. But that isn’t the only thing impacting the BHP share price.
In what might come as some relief to BHP shareholders, the ‘Big Australian’ has (perhaps unfortunately in hindsight) selected today as the day its shares trade ex-dividend for its upcoming shareholder payment.
Why has a dividend knocked 7% off the BHP share price?
When a company trades ex-dividend, it means that any new shareholders from that day onwards are not entitled to the upcoming payment. It also means anyone who held the shares prior to the ex-dividend date will receive the payment. That’s even if they sell the shares between the ex-dividend date and the date of payment.
As such, the market usually ‘prices in’ this now-lost dividend into the company’s share price. It’s of no more value to new shareholders, and the share price fall reflects this. The drop is the value of the dividend leaving the company’s corporate bank account, never to return.
That is what has happened to BHP shares today.
It was only last week that BHP reported its half-year earnings results. These happened to include a record interim dividend of US$1.50. The Aussie dollar amount hasn’t been determined yet. But that dividend would be worth a payment of roughly $2.09 per share on today’s currency exchange rates.
So today, we have likely seen roughly $2.09 come out of the BHP share price as a result of the ex-dividend date arriving. The other losses can be attributed to the normal swings of the market.
BHP shareholders will receive the dividend on 28 March.
The post Why Russia was not the only thing that dragged the BHP (ASX:BHP) share price lower today appeared first on The Motley Fool Australia.
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More reading
- How BHP (ASX:BHP) has become ‘The Bigger Australian’ and why this might not be good news for the ASX 200
- Does BHP (ASX:BHP) really have a 14% dividend yield right now?
- The iron ore price outlook could be darkening amid China’s latest plans
- 2 ASX 200 dividend shares named as buys
- ASX 200 shares stage comeback amid Russia optimism
Motley Fool contributor Sebastian Bowen 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 Bruce Jackson.
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