The National Australia Bank Ltd. (ASX: NAB) share price fell as much as 5% today after the bank’s ASX shares went ex-dividend.
About NAB
NAB is one of the four largest financial companies in Australia in terms of market capitalisation, earnings and customers. In 2018, NAB was Australia’s largest lender to businesses and has operations in wealth management and residential lending.
NAB Pays A 83c Fully Franked Dividend
Earlier this month, when the bank released its half-year report, NAB’s management announced they would pay a dividend of 83 cents per share, fully franked. The following video from our educational website, Rask Finance, explains what Franking Credits are:
Why Are NAB Shares Down 5%?
When a company announces a dividend to shareholders it’ll give three key dates:
- The ‘ex-dividend’ date. This is the last day for investors to buy shares and receive the next dividend…
- The ‘record date’. This is the date that the company (e.g. NAB) identifies the names of its shareholders to determine who will receive the dividend.
- The ‘payment date’. This is the date the company pays the dividend.
So why do shares fall?
If you think about it, when a company pays a cash dividend from its own bank accounts back to its shareholders, the company’s shares should be worth slightly less than they were the day before the cash dividend was paid. Why? The cash now belongs to investors, not the company.
The following video from Rask Finance explains everything you want to know about ASX share dividends:
Why Did NAB Shares Fall 5% and Not 3%?
Sharp-minded Rask Media readers are probably wondering why NAB shares fell 5% and not 3%. A 3% fall would more accurately reflect the size of the dividend to be paid to shareholders, based on yesterday’s share price, right?
Well, it seems NAB shares have been caught up in the ASX’s broad selloff this morning, which Rask Media’s Jaz Harrison reported here.
Are NAB Shares A Buy?
Though some analysts expected it to happen, NAB recently cut its dividend payment to bolster its business. It shocked some unwitting shareholders.
In my opinion, Australia’s major banks, including Commonwealth Bank of Australia (ASX: CBA), Westpac Banking Corp (ASX: WBC), NAB and ANZ Banking Group (ASX: ANZ) are entering a period of much slower growth. That is, even slower than their growth was during the prior five years.
Eventually this anaemic growth will feed through to lower dividends, in my opinion. Therefore, I can think of many other places where I’d rather invest my money in 2019 and beyond.
The three ASX shares in the free investing report below are probably a good place to start.
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Disclosure: At the time of publishing, Owen does not have a financial interest in any of the companies mentioned.
