The Woolworths Group Ltd (ASX: WOW) share price is under pressure on Wednesday.
In morning trade, the supermarket giant's shares are down almost 3% to a new multi-year low of $29.11.
What's going on? Let's find out.
Today's decline could actually be classed as good news for the company's shareholders.
That's because this weakness has been caused by Woolworths' shares trading ex-dividend this morning, which signifies that pay day is coming!
When a share goes ex-dividend, it means the rights to an upcoming dividend payment have now been settled.
As a result, if you were to buy Woolworths shares today, you would not receive its dividend when it is paid. Instead, it would go to the seller of the shares, even though they won't own them when pay day comes around.
Given that a dividend makes up part of a company's valuation, a share price will often drop on the ex-dividend date to reflect this. After all, new buyers of a company's shares don't want to pay for something that they won't receive.
Last month, the supermarket giant released its half year results and reported a 3.7% increase in sales to $35.9 billion but a 20.6% decline in net profit after tax to $739 million.
Its top line growth was driven by a combination of solid sales growth across the company and the acquisition of Petstock. Whereas its profit decline was driven largely by supply chain disruption caused by industrial action.
In light of its weaker profits, the Woolworths board elected to cut its fully franked interim dividend by 17% to 39 cents per share. It is this dividend that the company's shares are going ex-dividend for today.
If you are eligible to receive Woolworths' interim dividend, then you can look forward to pay day next month on 23 April.
After which, the team at Goldman Sachs is forecasting the company to pay a fully franked 46 cents per share final dividend with its full year results later this year.
This will bring its total dividends to 85 cents per share for FY 2025, which is down 18.3% from $1.04 per share in FY 2024 (excluding special dividends).
Goldman then expects increases to $1.06 per share in FY 2026 and then $1.23 per share in FY 2027.
The broker has a buy rating and $36.10 price target on the Woolworths share price.
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