Know the benefits of a demat account
Free Demat account in minutes | Low brokerage | Online account opening
A final dividend is recommended by a company’s board after the financial year ends and is approved by shareholders at the annual general meeting (AGM).
- It is based on the company’s profits, financial position, retained earnings, and future business needs.
- The total payout is calculated as dividend per share multiplied by the number of outstanding shares.
- For example, a dividend of ₹5 per share on 10 crore shares results in a total payout of ₹50 crore.
- Unlike an interim dividend, a final dividend is approved after the financial year is completed.
- Once declared, it is generally required to be paid within 30 days.
- A final dividend is not guaranteed, as a company may choose to retain profits for future requirements.
What is the final dividend?
What role do dividends play in stock investment?
A final dividend is a portion of eligible profits that a company distributes to its shareholders after the financial year ends. The board of directors recommends the dividend, and shareholders approve it at the annual general meeting (AGM).
Unlike an interim dividend, which the board may declare during the financial year, a final dividend is considered after the company’s annual financial performance is available.
The amount depends on factors such as profits, retained earnings, cash requirements and future business needs. A final dividend is not guaranteed, as the company may decide to retain its profits instead.
How do you calculate the final dividend?
The total final dividend is calculated by multiplying the dividend per share by the number of outstanding shares.
Formula:
| Final dividend = Dividend per share × Number of outstanding shares |
For example, suppose a company declares a final dividend of ₹4 per share and has 50 lakh outstanding shares.
Calculation:
₹4 × 50 lakh shares = ₹2 crore
Therefore, the company would distribute a total final dividend of ₹2 crore.
Current IPO
Interim vs final dividend: What is the difference?
An interim dividend is declared by the board during the financial year. A final dividend is recommended after the financial year ends and requires shareholder approval at a general meeting.
| Feature | Interim dividend | Final dividend |
|---|---|---|
| Timing | During the financial year | After the financial year |
| Approval | Declared by the board | Recommended by the board and approved by shareholders |
| Financial period | Based on financial performance available at the time | Based on the completed financial year |
| Purpose | Distributes profits during the year | Distributes profits after year-end |
Both may form part of the total dividend distributed by a company for a financial year.
What are the characteristics of a final dividend?
A final dividend has several key characteristics:
- It is considered after the financial year ends.
- The board of directors recommends the dividend.
- Shareholders approve it at the AGM.
- It is based on the company’s profits and other eligible sources permitted under applicable law.
- The amount approved by shareholders cannot exceed the amount recommended by the board.
- Once declared, the dividend is generally required to be paid within 30 days.
A company may also retain part of its profits for business requirements instead of distributing the entire amount as dividends.
Final dividend vs liquidating dividend: What is the difference?
A final dividend is generally distributed from profits available for dividend after the company evaluates its annual financial performance. It forms part of the normal distribution of profits to shareholders.
A liquidating dividend, on the other hand, involves distributing capital or proceeds from the company’s assets to shareholders, generally as part of a liquidation or similar capital-return process.
| Feature | Final dividend | Liquidating dividend |
|---|---|---|
| Main source | Profits available for distribution | Capital or proceeds from assets |
| Business status | Business normally continues | Usually connected with liquidation or return of capital |
| Nature | Regular profit distribution | Capital distribution |
| Frequency | May be declared after a financial year | Generally not a regular annual payment |
Start investing today
Open Demat Account
Open Trading Account
Margin Trading Facility
Who declares a final dividend?
The board of directors first reviews the company’s financial position and recommends a final dividend. The recommendation is then placed before shareholders for approval at the annual general meeting.
Shareholders can approve a dividend up to the amount recommended by the board. They cannot increase the dividend beyond the board’s recommendation.
For listed companies, information about the recommended final dividend and related dates is disclosed through the applicable regulatory process.
Upcoming IPO
When is the final dividend paid?
A final dividend is paid after shareholders approve it at the general meeting and it is formally declared.
Payment timeline: A declared dividend is generally required to be paid to eligible shareholders within 30 days from the date of declaration.
The company identifies eligible shareholders according to the applicable record date or book-closure process. Dividend payments are generally credited through the registered banking details available for eligible shareholders.
Features and Benefits of LAS
Tenure 36 months
Flexible repayment from 7 days to 36 months
1000+ shares
Get 50% value on 1000+ shares
All DP shares available
All companies’ and DPs’ Demat accounts accepted for loans
Customer portal
Handle loans, shares, and statements — all in one place
Conclusion
A final dividend is a distribution of eligible profits made after a company completes its financial year. The board recommends the amount, and shareholders approve it at the AGM.
The amount depends on the company’s profits, financial position and business requirements. Once declared, the dividend is generally required to be paid within 30 days. Understanding how final dividends are recommended, calculated and paid can help shareholders understand the dividend income they may receive from their shareholdings.
Top Investment Options for You
Related Articles
Frequently Asked Questions
Final Dividend
What is the difference between an interim and a final dividend?
An interim dividend is declared by the board during the financial year, while a final dividend is recommended after the financial year ends and requires shareholder approval at the AGM. Interim dividends are based on the financial position available during the year, whereas final dividends are considered after the company has completed its annual financial reporting.
Who is eligible for the final dividend?
You are eligible for a final dividend if you are identified as an eligible shareholder according to the company’s applicable record date or book-closure process. Once shareholders approve the dividend at the AGM, the company pays it to eligible shareholders within the applicable timeline. The exact eligibility depends on whether your name appears in the relevant shareholder records for the declared dividend.
Disclaimer
Investments in the securities market are subject to market risk, read all related documents carefully before investing.
Broking services offered by Bajaj Financial Securities Limited (Bajaj Broking). Reg Office: Bajaj Auto Limited Complex, Mumbai –Pune Road Akurdi Pune 411035. Corporate Office: Bajaj Financial Securities Limited, 1st Floor, Mantri IT Park, Tower B, Unit No 9 & 10, Viman Nagar, Pune, Maharashtra 411014. SEBI Registration No.: INZ000218931 | BSE Cash/F&O/CDS (Member ID:6706) | NSE Cash/F&O/CDS (Member ID: 90177) | MCX (Member ID: 57680) | DP registration No: IN-DP-418-2019 | CDSL DP No.: 12088600 | NSDL DP No. IN304300 | AMFI Registration No.: ARN –163403.
Details of Compliance Officer: Mr. Harinatha Reddy Muthumula (For Broking/DP/Research) | Email: compliance_sec@bajajbroking.in | Contact No.: 020-4857 4486. For any investor grievances write to compliance_sec@bajajbroking.in/ compliance_dp@bajajbroking.in (DP related)
This content is for educational purpose only. Securities quoted are exemplary and not recommendatory.
Research Services are offered by Bajaj Broking as Research Analyst under SEBI Regn: INH000010043.
For more disclaimer, check here: https://www.bajajbroking.in/disclaimer