What is a Dividend in Between?

An interim dividend is a dividend payment made before a company’s annual general meeting (AGM) and the release of its final financial records. This announced dividend usually comes with the company’s interim financial statements. In the UK, where dividends are usually paid every six months, the interim payout is paid more often. Most of the time, the interim dividend is the smaller of the two amounts that shareholders get.

How to Read an Interim Dividend

People put money into businesses by buying bonds or stocks. Bonds have a set interest rate, and investors get paid before shareholders if the company goes bankrupt. However, investors don’t get any money when the share price increases. While most stocks don’t pay interest, some do. Earnings growth is passed on to owners through both interim and final dividends and an increase in the value of their shares. Directors decide to pay an interim payout, but shareholders have to agree to it first. If, on the other hand, earnings are known before the annual general meeting, a regular dividend, which is also called a final dividend, is voted on and passed. Last-minute and regular payments can be given out in stock or cash.

Since dividends are usually paid to owners every six months in the UK, it is more common for companies there to pay interim dividends.

Dividends: Final vs. Interim

Dividends are given out for every share that is owned. If you own 100 shares of company A and that company pays out $1 in dividends every year, you will get $100 every year from dividends. Investors will get $200 a year if company A doubles its payout. The company will pay out $2 per share. The final dividends are revealed and paid out every year along with the earnings. Final dividends are revealed after earnings are reported, but companies pay interim dividends from earnings that have been kept, not current earnings.

You can also consider retained earnings as gains that haven’t been shared yet. Companies usually make these payments every three or six months before the end of the year. In the UK, interim profits are paid every six months; in the US, they are paid every three months. Companies announce and pay out an interim dividend when they are having a perfect earnings season or when the law makes it more advantageous for them to do so.

A final or regular payout can be a set amount every three, six, or twelve months. It could be a share of your cash income or earnings. It can also be paid for with the money the business makes after paying for working capital and capital spending (CapEx). What kind of dividend policy or plan is used depends on what the company’s leaders want for its shareholders. The strategy for interim dividends can be the same as for final dividends. However, because interim dividends are paid out before the end of the fiscal year, the financial records that go with them have not been audited.

When there is an interim and final dividend in the same fiscal year, the interim dividend is usually less than the final payout.

Example of an Interim Dividend

A half-year dividend was released by Plato Income Maximiser Ltd. (ASX: PL8) on February 13, 2019. People who owned shares as of Thursday, February 28, would get a dividend of 0.005 per share on that day. The head of the company says that they know that retirees need to make up for lost income from government pensions. Because the company needs to meet this, its “investment strategy prioritizes regular and sustainable dividend payments.”

Conclusion

• When a company gives money to its owners every six months, one of the dividends it usually gives is an interim dividend.
• The interim dividend is usually given out before the company’s yearly general meeting and its final financial statements are released.
• When a company’s final financial records are made public, the final dividends are paid out.
• Because of this, present earnings are used to pay final dividends, and retained earnings are used to pay interim dividends.
• The company’s Board of Directors decides on an interim payout. However, shareholders decide if the dividend is paid or not.