The S&P/ASX 200 Index (ASX: XJO) witnessed a dramatic drop in Nine Entertainment Co. Holdings Ltd (ASX: NEC) shares, which plunged 36% from yesterday’s closing price of $1.70 to an intraday low of $1.09 shortly after the market opened. Although the shares have slightly rebounded to $1.14, they remain down by 33% at the time of writing.
Meanwhile, the broader ASX 200 index is experiencing a modest decline of 0.25%, standing at 8,808.3 points. Nine Entertainment’s steep decline marks it as the biggest loser on the ASX 200 today, raising questions about the factors behind this significant drop.
Ex-Dividend Adjustment Sparks Sharp Decline
The sudden fall in Nine Entertainment shares can be attributed to the company going ex-dividend today. This means that the shares are now trading without the next dividend entitlement, making them less attractive to buyers compared to yesterday. The substantial dividend of 53 cents per share, which represents nearly a third of the stock’s closing value from the previous day, is a key factor in the dramatic price adjustment.
Notably, there has been no price-sensitive news from Nine Entertainment this morning. The company is one of over 35 ASX shares going ex-dividend this week, but its dividend stands out due to its size.
Understanding the High Dividend
During the recent earnings season, Nine Entertainment reported a 2% increase in revenue to $2.68 billion for FY25. However, operating earnings before interest, taxes, depreciation, and amortisation (EBITDA) fell by 6% to $486.1 million, and net profit after tax (NPAT) decreased by 10% to $194.4 million. Fully diluted earnings per share (EPS) were 10.5 cents, down 10% from FY24.
Despite these mixed results, Nine Entertainment declared a final dividend of 4 cents per share, fully franked. The real surprise, however, came with the announcement of a special dividend of 49 cents per share, following the divestment of its 60% stake in the Domain property advertising business. This sale brought in $1.4 billion in cash proceeds for Nine.
Investors were initially buoyed by the dividend news, with Nine Entertainment shares rising 7.6% on the day of the report, reaching a new 52-week high of $1.90.
The dividend is scheduled to be paid on September 26, providing shareholders with a significant return.
Market Reaction and Broader Implications
The sharp decline in Nine Entertainment shares highlights the impact of ex-dividend adjustments on stock prices. While such drops are not uncommon, the size of Nine’s dividend amplified the effect. This situation underscores the importance of understanding dividend schedules and their potential impact on share prices.
According to market analysts, the drop is a temporary adjustment, and the company’s fundamentals remain strong. The divestment of Domain, while reducing short-term revenue, provides Nine with substantial capital to reinvest in its core media operations or pursue new opportunities.
“The ex-dividend drop is a classic market reaction, especially when a special dividend is involved,” said a senior market analyst. “Investors should focus on the company’s long-term strategy and potential for growth.”
Looking Ahead
As Nine Entertainment navigates this period of adjustment, investors will be watching closely for any strategic moves the company might make with its newfound liquidity. The media landscape continues to evolve, and Nine’s ability to adapt will be crucial for maintaining its market position.
In the coming weeks, market observers will also be looking at how other ASX 200 companies fare as they go ex-dividend, providing further insights into the broader market dynamics at play.
For now, Nine Entertainment’s sharp share price drop serves as a reminder of the complexities and opportunities inherent in dividend investing.
