What Is Interim Dividend

What Is Interim Dividend?

An interim dividend is a dividend paid to shareholders by a corporation before the end of its fiscal year. These distributions are typically made when a company has excess profits and wishes to distribute them to its shareholders.

Contents:

Interim Dividend Meaning

An interim dividend means a payment made before the annual general meeting (AGM). A firm declares it to shareholders before the end of the fiscal year. It is considered a portion of the overall dividend payment that will be made for the calendar year. 

Companies only pay interim dividends if they have enough earnings and profits. They may help companies compensate shareholders for their investments and provide shareholders with a regular income.

Interim Dividend Example

Nestle India

For 2023, Nestle India declared an interim dividend of ₹27 per ₹10 equity share. The record date for deciding which shareholders are eligible to receive the interim dividend was set for April 21, 2023. The interim dividend for the year 2023 was paid along with the final dividend for the year 2022 beginning on May 8, 2023. Nestle India has a strong dividend track record and has declared dividends consistently over the past five years.

Reliance Industries Limited

Reliance Industries Limited has declared a dividend of ₹9 per ₹10 completely paid-up equity shares for the fiscal year ending on March 31, 2023. This dividend was designated as a final dividend, with a record date of August 21, 2023. Reliance Industries Limited has consistently declared dividends in the past five years and has a solid dividend track record.

TCS

TCS announced a special dividend of ₹67 per equity share of Re 1 and a third interim dividend of ₹8, along with its Q3FY23 results in January 2023. The record date for determining whether a shareholder was eligible to receive ₹75 in dividends was January 17, 2023, and the payment date was February 3, 2023. TCS declared an interim dividend of ₹9 per share in July 2023. The interim dividend record date was July 20, 2023, and the payment date was August 7, 2023. 

Calculation Of Interim Dividend

The calculation formula for interim dividends is:

Interim dividend per share = (Profits for the previous quarter * Dividend payout ratio) / Number of shares outstanding

Interim Dividend Vs Final Dividend

The primary difference between Interim Dividend and Final Dividend is that Interim dividends are given to shareholders during the fiscal year before the annual financial statements are finalized, whereas final dividends are paid after the fiscal year has concluded, and the annual financial statements have been approved. 

Let’s look at other differences as well:

Interim DividendFinal Dividend
Considered as an advance against the profits of the current financial yearConsidered as the dividend for the whole financial year
It is not a statutory paymentIt is a statutory payment as per the Companies Act
Can be paid any number of times during the yearPaid once a year after the adoption of financial statements at the Annual General Meeting
Amount of the interim dividend is adjusted against the final dividendNo adjustment; it is the total dividend for the year
Board of Directors approve interim dividendShareholders approve final dividend at the Annual General Meeting

Difference Between Proposed Dividend and Interim Dividend

The primary difference between a proposed dividend and an interim dividend is that proposed dividends are suggested by directors and need shareholder approval at the AGM. Interim dividends are decided by directors based on financial results and don’t need AGM approval.

Let’s look at some other differences as well:

Proposed DividendInterim Dividend
The proposed dividend is presented for approval at the company’s Annual General Meeting (AGM), which is typically met sometime after the end of the fiscal year.Interim dividends are declared and distributed periodically throughout the financial year, typically every six months.
The record date for the proposed dividend occurs after its formal approval at the AGM.The record date for interim dividends is established when the Board of Directors declares the interim dividend.
The proposed dividend amount considers the company’s full-year profits.The quantity of the interim dividend is determined by the company’s quarterly or half-yearly profits.
The proposed dividend is paid to shareholders following the annual meeting and record date.Interim dividends are paid before the record date, established when the dividend is declared.

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 Interim Dividend – Quick Summary

  • The interim dividend is a partial payment made before the year-end financial statements are compiled.
  • It provides investors with a share of profits before the end of the year, as opposed to annual dividends.
  • The final dividend is paid after annual accounts have been finalized, whereas the interim dividend is paid in advance based on estimates.
  • A proposed dividend is the entire sum of dividends recommended by the board for approval at the AGM, while an interim dividend is a payment made in advance of the final accounts.

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Interim Dividend Meaning – FAQs  

What is an Interim Dividend in Simple Terms?

An interim dividend is a portion of the expected annual dividend paid to shareholders before the company’s fiscal year ends. It provides shareholders access to a portion of earnings throughout the year.

What is the Difference Between Interim Dividend and Dividend?

The main difference is that an interim dividend is a partial or preliminary payment made before releasing the company’s annual financial results, whereas a regular or final dividend is the complete dividend payment for the entire fiscal year, declared after the results are released.

Who is Eligible for an Interim Dividend?

All shareholders who own company shares as of the record date for the interim dividend are qualified to receive it. Typically, the record date occurs a few days before the payment date.

What is the Significance of Interim Dividend?

It provides shareholders with consistent cash flow throughout the year instead of waiting for the annual dividend payment. It also indicates the company’s solid earnings and cash position.

Is an Interim Dividend Taxable?

Yes, interim dividends are taxable as income in the year they are received by shareholders, similar to regular/final dividends.

How do I Claim Interim Dividends?

Interim dividends are promptly credited to the demat or bank accounts of eligible shareholders registered with the company or its RTA (Registrar and Transfer Agents). Investors are not required to submit a distinct application to receive interim dividends.

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