👉 Background: Nine Entertainment is one of Australia’s major media companies, running TV networks like Channel 9 and 9Honey and newspapers like The Sydney Morning Herald, The Age and The Australian Financial Review. It also runs radio stations like 2GB and 3AW, streaming platform Stan and also owned a 60% stake in Domain, the property listing platform - until it recently cashed out as part of Domain's sale to the US real estate platform CoStar.

‍👉 What happened: While Nine was flush with $1.4 billion Domain cash, it chose not to reinvest most of the cash, but instead, to return $780 million to investors - or roughly 49 cents per share… that’s on top of the 4c per share dividend it had already promised. And, late last week, Nine Entertainment’s shares plummeted 36% in a single day.

‍👉 What else: But it wasn’t because of any big earnings downgrades... it was because its shares, with this special dividend, had gone ex-dividend.

‍What's the key learning?

‍💡When companies pay dividends, there’s a key date to know: the ex-dividend date. The ex-dividend date is the day when a share starts trading without the right to its next dividend payment.

💡As an investor, it means that if you buy shares before this date, you’re entitled to the dividend. But if you buy the shares on or after the date, then you miss out. Because of this, a company’s share price usually drops by roughly the same amount as the dividend being paid. For Nine Entertainment, its 53c dividend payment to investors went ex-dividend last week ,which is why its share price dropped by ~56c by the end of the day.

💡This drop wasn’t actually tied to any updates in Nine’s performance. In fact, Nine Entertainment was one of more than 35 companies to go ex-dividend last week. But given it had a special dividend, its share price was impacted much more than others.