A final dividend is paid after a company’s annual financial results are announced. It’s based on the company’s profit and is calculated as a percentage of shares. It differs from interim dividends, which are paid before the year-end results.
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What Is the Final Dividend?
A final dividend is a payment made by a company to its shareholders after its annual financial results are declared. It is typically decided during the company’s annual general meeting (AGM), based on the net profit of the year.
Unlike interim dividends, which are paid before the financial year ends, final dividends reflect the company’s complete financial performance. They are usually distributed once the company’s annual report is finalized, showcasing the total profits earned during the fiscal year.
The final dividend amount is determined by the company’s board of directors, who assess the overall financial health and retained earnings. The payment is typically made in the form of cash or additional shares to shareholders.
Final Dividend Example
A final dividend is declared based on the company’s annual financial performance. For example, if a company announces a final dividend of ₹5 per share and you own 200 shares, you will receive ₹1,000 (₹5 x 200 shares).
The final dividend is typically decided by the board of directors after reviewing the company’s profitability and financial position for the year. It is usually paid after the annual general meeting (AGM), where shareholders approve the dividend proposal and the company’s financial results.
Once approved, the final dividend is paid to shareholders in cash or through additional shares, as determined by the company. The payment is made on a specified date to all shareholders who hold shares by the record date.
How To Calculate Final Dividend?
To calculate the final dividend, start by determining the company’s net profit for the financial year. The company’s board of directors decides on a portion of the profit to be distributed as a dividend, usually expressed as a percentage of earnings.
Next, the dividend amount per share is determined by dividing the total dividend payout by the number of outstanding shares. For example, if the company plans to distribute ₹500,000 and has 100,000 shares, the dividend per share would be ₹5 (500,000 ÷ 100,000).
Once the dividend per share is decided, multiply it by the number of shares an investor owns. If you hold 200 shares and the dividend is ₹5 per share, you would receive ₹1,000 as the final dividend (₹5 x 200).
Interim Vs Final Dividend
The main difference between interim and final dividends is the timing of distribution. Interim dividends are paid before the company’s financial year ends, while final dividends are paid after the financial year’s results are declared and approved by shareholders.
| Point | Interim Dividend | Final Dividend |
| Timing | Paid before the year-end, based on interim performance. | Paid after the company’s annual results are declared. |
| Approval | Decided by the board of directors, no shareholder approval. | Requires approval at the annual general meeting (AGM). |
| Frequency | Typically paid once or twice during the year. | Paid only once, after the financial year ends. |
| Amount | Generally smaller, reflecting mid-year performance. | Larger, based on the company’s complete annual performance. |
Characteristics of Final Dividend
The main characteristics of a final dividend include its timing, approval process, amount and payment method. It is declared after the company’s annual financial performance and requires shareholder approval. The final dividend reflects the company’s overall profitability for the year.
- Timing: A final dividend is declared after the company’s fiscal year ends and is paid once the annual financial results are confirmed, typically at the annual general meeting (AGM). This ensures the payment reflects the company’s full-year performance.
- Approval: The final dividend requires approval from the company’s shareholders during the AGM. The board of directors proposes the dividend, but it cannot be paid without shareholder consent, making it a more formal decision.
- Amount: The amount of the final dividend depends on the company’s profitability and retained earnings. It is usually higher than interim dividends, as it is based on the company’s complete financial performance for the entire year.
- Payment Method: The final dividend is typically paid in cash, but companies may also offer it in the form of additional shares. The payment is made on a specified date to all shareholders who own shares on the record date.
Final Dividend vs Liquidating Dividend
The main difference between a final dividend and a liquidating dividend lies in the purpose and timing of the distribution. A final dividend is paid after a company’s annual performance, while a liquidating dividend is paid when a company is being liquidated or dissolved.
| Point | Final Dividend | Liquidating Dividend |
| Purpose | Paid as part of regular profits after annual results. | Paid when a company is being dissolved or liquidated. |
| Timing | Declared after the company’s fiscal year and AGM approval. | Declared during the liquidation process, after assets are sold. |
| Source of Payment | Paid from the company’s profits for the year. | Paid from the company’s remaining assets after liabilities. |
| Frequency | Typically paid annually after the financial year ends. | Paid once, during the liquidation process, as assets are liquidated. |
Who Will Declare Final Dividend?
The company’s board of directors typically declares the final dividend. They assess the company’s profitability, financial health and retained earnings before recommending the dividend amount. This decision is made after reviewing the annual financial performance.
Once the board of directors approves the final dividend, it is presented to shareholders for approval at the Annual General Meeting (AGM). Shareholders must approve the proposed dividend before it can be paid out. If approved, the final dividend is distributed to shareholders based on the number of shares they hold.
When Is the Final Dividend Paid?
The final dividend is paid after the company’s annual financial results are finalized and shareholders approve it at the Annual General Meeting (AGM). The board of directors declares the dividend and the approval process ensures transparency in its distribution.
Once approved by shareholders at the AGM, the final dividend is paid on a specified date. The company sets a record date and all shareholders who hold shares on that date are eligible to receive the dividend. Payments are typically made in cash or additional shares, depending on the company’s policy.
We hope that you are clear about the topic. But there is more to learn and explore when it comes to the stock market, commodity and hence we bring you the important topics and areas that you should know:
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| Gross NPA vs Net NPA |
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| What is Earnings per share |
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| What is interim dividend |
Final Dividend Meaning – Quick Summary
- A final dividend is paid after a company’s annual results, are decided at the AGM. It reflects full-year performance and is typically distributed in cash or shares.
- A final dividend is declared based on annual performance, approved at the AGM and paid to shareholders in cash or shares, after the record date.
- To calculate the final dividend, determine the total payout, divide by outstanding shares and multiply by the number of shares owned by the investor.
- Interim dividends are paid before year-end based on interim results, while final dividends are paid after annual results, requiring shareholder approval and reflecting full-year performance.
- A final dividend is declared after the fiscal year, requiring shareholder approval. It reflects full-year performance, is usually paid in cash and is based on profitability.
- A final dividend is paid after annual results, while a liquidating dividend is paid during the liquidation of remaining assets. Final dividends are recurring and liquidating dividends are one-time.
- The board declares the final dividend based on financial performance and then seeks shareholder approval at the AGM. If approved, it’s paid based on shares owned.
- The final dividend is approved at the AGM and paid on a specified date. Shareholders on the record date receive payments in cash or shares.
What Is the Final Dividend? – FAQ
A final dividend is a payment made by a company to its shareholders after the annual financial results are announced and approved. It is typically declared by the board of directors and requires shareholder approval at the Annual General Meeting (AGM).
The main difference between interim and final dividends is the timing. An interim dividend is paid during the financial year before the results are finalized, while a final dividend is paid after the company’s annual results are declared and approved by shareholders.
The company’s board of directors declares the final dividend after assessing the company’s financial performance for the year. Once the board approves the dividend, it is presented for approval to shareholders at the Annual General Meeting (AGM).
To calculate the final dividend, first determine the total dividend payout from the company’s profit. Then, divide this amount by the number of outstanding shares. Multiply the dividend per share by the number of shares an investor holds.
Shareholders who hold shares of the company on the record date are eligible for the final dividend. The record date is set by the company to determine which shareholders will receive the dividend, typically following the Annual General Meeting (AGM).
Yes, final dividends are taxable. In India, they are subject to tax at the applicable rates for individuals. Companies no longer pay Dividend Distribution Tax (DDT) and the tax liability is shifted to the shareholders receiving the dividend.
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Disclaimer: The above article is written for educational purposes and the companies’ data mentioned in the article may change with respect to time. The securities quoted are exemplary and are not recommendatory.
