What is dividend policy

what is dividend policy

What is a final dividend?

A final dividend refers to the dividend declared by a company's board of directors after the company has issued its full-year financial statements for its fiscal year. The final dividend is typically larger than any interim dividends that may have been issued during the fiscal year; this is because the board of directors is not sure of the entire amount of cash that is available for distribution to shareholders until the final results are available for the full year, and so it tends to be conservative in the size of any interim dividends that are issued.

The amount of the final payment is a fixed amount per share of common stock, and is typically made known to the public during the annual shareholders' meeting. This is typically a cash payment, not a stock dividend.

The amount of the final dividend may be forecasted by analysts, or even by company management in its own earnings guidance, in which case the actual amount of the final dividend

that is eventually settled upon is sometimes considered the adjusted final dividend or the revised final dividend .

The term final dividend is used more frequently in Europe than in the United States.

The term final dividend can also refer to the final, liquidating dividend issued to shareholders when a company is terminating its existence, but this type of dividend is more commonly known as a liquidating dividend .

The concept of a final dividend is flawed for businesses that routinely issue dividends, since they likely have a dividend policy already in place that mandates a steady or slightly increasing dividend level over time. By issuing dividends in such a consistent manner, a company attracts income-oriented investors who rely upon a steady stream of dividends. In this case, continually adjusting the dividend amount over time, as is implied by the final dividend concept, makes no sense from an investor relations perspective.

Similar Terms

The final dividend is also known as the year-end dividend .

Related Topics

Source: www.accountingtools.com

Category: Bank

Similar articles: