What Is Final Dividend

What Is Final Dividend?

A final dividend is the annual dividend paid to shareholders by a company during a financial year. It is declared after the company’s annual financial statements are approved at the annual general meeting. The final dividend is the total dividend for the year minus any interim dividends already paid. 

Contents:

Final Dividend Meaning

A final dividend is the last dividend payment a company distributes to its shareholders during a fiscal year. It represents the remaining portion of the total dividend for the year after any interim dividends have been deducted. The final dividend is only declared after the board has prepared and approved the annual financial statements, allowing the company to determine its distributable profits for the year. 

The final dividend declaration is subject to shareholder approval at the company’s annual general meeting. The final dividend is paid only after shareholders approve it at the annual meeting, with the date determined by the board of directors. 

Final Dividend Example 

Reliance Industries Limited

Reliance Industries Limited, led by billionaire Mukesh Ambani, proclaimed a final dividend of Rs. 9 per completely paid-up equity share of Rs. The final dividend was paid on August 29, 2023, to qualifying stockholders. Over the previous five years, Reliance Industries Limited has routinely declared dividends.

Infosys

For the fiscal year that ended on March 31, 2023, Infosys has declared a final dividend of Rs. 17.50 per share. The record date and payment date for the final dividend were June 2 and 16, 2023, respectively. The company also declared interim dividends throughout the year, in April 2023. Infosys paid 3.53% dividends in 2022-23.

HDFC Bank

HDFC Bank declared a final dividend of Rs. 19 per equity share, having a par value of Rs. 2 for the fiscal year ending March 31, 2023. The last dividend record and payment dates were June 2 and 16, 2023. HDFC Bank has issued dividends for five years without fail. HDFC Bank has declared interim dividends throughout the year, including Rs. 44 per equity share in May 2023.

How To Calculate Final Dividend?

Net Profit – Interim Dividends = Balance Profit × Payout Ratio = Total Final Dividend / No. Of Shares = Final Dividend per Share.

Here are the stages for calculating a company’s final dividend:

  1. Determine the company’s net income/profit for the entire financial year. It will be reflected in the annual financial statements of the company. 
  2. Deduct from the net profit any interim dividends already paid during the year. Interim dividends are partial dividend payments made before the preparation of the final accounts.
  3. The board of directors will recommend an appropriate final dividend payout percentage from the remaining profit. This ratio is known as the dividend payout ratio. 
  4. After adjusting for interim dividends, apply the dividend payout ratio to the remaining net profit. This represents the entire amount of the ultimate dividend.
  5. To calculate the dividend per share, divide the total ultimate dividend amount by the number of outstanding shares. 
  6. The dividend per share and any interim dividends comprise the total dividend for the entire fiscal year. 
  7. The final dividend is then proposed to shareholders for approval at the AGM prior to its official declaration and payment.

Interim Vs Final Dividend

The main difference between interim and final dividends is the approval procedure. The Board of Directors declares interim dividends based on the company’s estimated profits for the period without shareholder approval. On the other hand, shareholders must approve the final dividend at the company’s Annual General Meeting (AGM). The board proposes it and requires shareholder approval based on the company’s actual full-year profits as reported in its audited financial statements. 

ParametersInterim DividendFinal Dividend
TimingDeclared periodically during the financial year, usually half-yearly.Declared only once for the full financial year after annual accounts are prepared.
Basis for declarationBased on company’s estimated/projected profits for the period.Based on the company’s actual profits for the full financial year as per audited financial statements.
PurposePaid to provide regular income to shareholders.Paid to distribute remaining profits to shareholders.
Portion of Profits DistributedAmount of interim dividend deducted from final profits to determine final dividend.Constitutes the total dividend payout along with interim dividends, if any.
FrequencyNot a fixed amount, it can be increased/decreased.Usually, a fixed amount recommended by the Board post-AGM approval.
PaymentPaid within 1-2 months of declaration.Paid within 30 days of AGM approval of accounts and dividend.

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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What Is Final Dividend – Quick Summary

  • The final dividend is the last dividend paid from a company’s profits for the fiscal year.
  • It is the dividend paid to shareholders after the annual accounts have been finalized and approved by the AGM.
  • The interim dividend is a payment made in advance of the final accounts, whereas the final dividend is paid after the annual accounts have been prepared and approved at the AGM.

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Final Dividend Meaning – FAQs

What is the meaning of the final dividend?

A final dividend is the total dividend paid by a company for the full financial year. It represents the culmination of the company’s annual financial performance. In contrast to interim dividends, paid throughout the year, the final dividend is declared only after the financial results have been audited and the company’s full-year performance can be accurately evaluated. The company is rewarding its shareholders for their investment and participation in the company’s success through this distribution. It demonstrates the company’s financial stability and profitability throughout the fiscal year.

Who will get the final dividend?

Final dividends are distributed to those shareholders whose names appear in the company’s register of members on the record date established for the purpose. 

What is interim vs final dividend?

The primary distinguishing factor between interim and final dividends is the level of authorization required for their declaration. Interim dividends are solely declared by the board of directors and do not require shareholder approval. On the other hand, final dividends proposed by the board based on full-year profits require shareholder approval at the AGM.

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