Regarding interim and final dividend

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Querist : Anonymous

Querist : Anonymous (Querist)

12 September 2012 I AM NOT CLEAR WITH THE CONCEPTS OF INTERIM AND FINAL DIVIDEND AND ITS EFFECT ON MKT PRICE OF SHARE OF A COMPANY.KINDLY TELL ME IN DETAIL.

CA Sripal Jain

CA Sripal Jain (Expert)
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12 September 2012 Interim Dividends are declared and distributed before the company’s annual earnings have been known.

These interim dividends are paid out of undistributed profits (reserves) brought from previous periods.

A company may choose to pay interim dividend quarterly or half yearly as long as it has adequate undistributed profits brought forward from previous periods.

These dividends usually accompanies the company’s interim financial statements
Final dividends are declared at the end of the financial period whereby the directors are aware of the companyâ€™s profitability and financial health.

Normally, final dividends are declared before the books are closed and will be paid the following year. Thus final dividends will appears as dividend payable or proposed dividends under current liabilities in the Balance Sheet of that period.

Normally, compared to interim dividends, the final dividends % constitute the largest payout.

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Querist : Anonymous

Querist : Anonymous (Querist)

13 September 2012 THANKS FR THE INFORMATION SIR PLEASE TELL ME MORE ABOUT THE CHANGE IN MARKET PRICE OF A SHARE DUE TO INTERIM AND FINAL DIVIDEND.AND ALSO PLEASE CLARIFY THE FOLLOWING ASPECTS:
1.EX DIVIDEND PRICE
2.CUM DIVIDEND PRICE

CA Sripal Jain

CA Sripal Jain (Expert)
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17 September 2012 change in market price:whenver dividends are declared the share price comes down,say if its a cash dividend or any kind,as the earnings get reduced and therfore there is a correction in market price of share

2. EX-dividend is the share price excluding the dividend component
CUM is including the dividend portion

Querist : Anonymous

Querist : Anonymous (Querist)

17 September 2012 SORRY SIR I STILL HAVE A QUERY WHEN THE INTERIM DIVIDEND IS DECLARED INVESTORS WILL BUY THE SHARES OF THOSE COMPANY AND WHEN DEMAND GOES UP IT WILL NATURALLY LEAD TO INCREASE N PRICE OF SHARE.HOWEVER AFTER THE RECORD DATE THE PRICE OF THE SHARE WILL COME DOWN.TILL THE RECORD DATE THE PRICE OF SHARE WILL CONTINUE TO REMAIN UP.PLEASE CORRECT ME IF I AM WRONG.SORRY FOR THE TROUBLE ONCE AGAIN.

Aashok Kumar Sharma

Aashok Kumar Sharma (Expert)
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20 July 2025 You're on the right track! Let me clarify these points step-by-step:

1. Effect of Dividend Declaration on Market Price
Before Record Date (Cum Dividend Period):
When an interim or final dividend is announced but before the record date, the share price usually includes the value of the dividend. So, investors are willing to pay a higher price because they expect to receive the dividend. This is called the cum dividend price.
On and After the Record Date (Ex-Dividend Period):
On the record date or the ex-dividend date, the stock starts trading without the dividend entitlement. After this date, new buyers are not entitled to the declared dividend. Therefore, the share price typically drops by approximately the dividend amount. This is called the ex-dividend price.
2. Why Does the Price Drop?
The drop in price reflects the fact that the company has less cash (or reserves) after paying out the dividend. So, the intrinsic value of the company (and hence share price) decreases by the dividend amount.

3. Your Observation
You are correct that:

Before the record date, demand increases because investors want to get the dividend, which pushes the price up.
After the record date, since the dividend entitlement is lost, the price drops approximately by the dividend value.

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