Final dividend: the year-end reward for shareholders

At the end of the financial year, many companies reward shareholders with a final dividend. This guide explains what a final dividend is, how it is approved and how it differs from an interim dividend.

Quick answer

A final dividend is a dividend declared by a company after its full-year results are known, based on the profits for the whole year. Unlike an interim dividend, a final dividend is usually recommended by the board and then approved by shareholders at the annual general meeting before it is paid.

Key takeaways

• A final dividend is declared after full-year results.
• It is based on the profits for the whole year.
• Shareholders approve it at the annual general meeting.
• It often comes after any interim dividend.
• It is not fixed and can change each year.

What is a final dividend?

A final dividend is a dividend a company declares once its full-year financial results are ready. It is based on the profit the company made across the entire year, so it reflects the complete picture.

Because it comes at the end of the year, a final dividend is often the main payout for many companies. It is the board's proposal on how much of the year's profit to return to shareholders.

How is a final dividend approved?

A final dividend is first recommended by the board of directors. It is then put to shareholders, who approve it by a vote at the annual general meeting before it can be paid.

This shareholder approval is a key difference from an interim dividend, which the board can declare and pay on its own during the year without waiting for the meeting.

How does it differ from an interim dividend?

So a company may pay an interim dividend partway through the year and then a final dividend after the results, giving shareholders two payouts in one year.

What dates should shareholders watch?

Like any dividend, a final dividend has an ex-date and a record date that decide who is eligible. You must hold the shares before the ex-date to receive it.

After shareholder approval and the record date, the dividend is paid into the bank account linked to your demat account on the payment date.

Is a final dividend guaranteed?

No. A final dividend depends on the year's profits and the company's plans, so it can rise, fall or be skipped in a weak year. Dividends are decided fresh each time.

A steady record of final dividends can be a positive sign, but it is not a promise. Any investment decision should be your own after proper research.

Frequently Asked Questions