Final Dividend

What is Final Dividend?

Final dividend is the amount declared by the board of directors to be payable as dividend to the shareholders of the company after the financial statements are prepared and issued by the company for the relevant financial year and is commonly announced in the annual general meeting of the company.

In simple words, Final Dividend is the dividend announced by the Company after the preparation of the final accounts and usually announced during the Annual General Meeting of the Company.

Example of Final Dividend

An investor holds 100 shares of a Company ABC, which has announced a final dividend of $ 3.5. The investor will receive $ 350 as the year-end dividend on his investment.

Now, the Company has doubled the dividend the next year, i.e., it is paying $ 7 per share. Thus, the investor will receive $ 700 as the year-end dividend on his 100 shares holding in the Company.

Key Points

Final Dividend vs. Interim Dividend

Although final and interim dividends are both paid to the investors as a return on their investment, they have some key differences. So let us look at the differences between the final vs. interim dividend.

  • The interim dividend is announced and paid in the middle of the financial year. In contrast, the final dividend is paid after the completion of the financial year.
  • The interim dividend is declared before the finalization of the accounts. In comparison, the final dividend is paid after the finalization of the accounts.
  • An interim dividend can be canceled with shareholder’s consent. Still, the year-end dividend, once approved, cannot be canceled, and it becomes an obligation of the Company to pay a year-end dividend.
  • The interim dividend is usually lesser than the year-end dividend.
  • Interim dividend requires a provision in the articles of association of the Company; however, no such provision is necessary for a year-end dividend.

Final dividends are also called a year-end dividend. The term “final” should not be confused with the final dividend paid by the Company, and it ceases to exist. Such a dividend is called a liquidating dividend. A liquidating dividend is a type of payment made by the Company when it closes its operations and pays the shareholders any amount/capital available with it after selling off the assets and settling its debts/other liabilities. The liquidating dividendsLiquidating DividendsWhen a business is completely closed, the shareholders will get a residual payment in the form of cash or other assets after all creditors and lenders obligations have been paid. These dividends are usually paid when management believes the business is no longer a going concern.read more are paid from the capital base of the Company, whereas the year-end dividend is paid from the profits earned from the operations of the Company.

Conclusion

The dividend is the return provided by the Company to the shareholdersShareholdersA shareholder is an individual or an institution that owns one or more shares of stock in a public or a private corporation and, therefore, are the legal owners of the company. The ownership percentage depends on the number of shares they hold against the company's total shares.read more from the profits earned during the financial year. The Company may announce a dividend during the part of the year called the interim dividend, or it may announce the dividend at the end of the year once it has ascertained the profits and financial position of the Company. Declaration of the dividend after the annual accounts have been prepared is called the final dividend or year-end dividend. Year-end dividends are paid on a yearly basis and are generally higher than interim dividends given by the Company.

Final Dividend Video

 

Recommended Articles

This article has been a guide to what is Final Dividend. Here we discuss key features of such a year-end dividend along with examples. Also, we discuss the differences between Interim Dividend vs. Final Dividend. You can learn more about Shareholders Equity from the following articles –

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