An interim dividend is the distribution of earnings to shareholders before the end of the fiscal year. Such dividends are typically paid out monthly or quarterly and in smaller amounts than an annual dividend.
The interim dividend is paid out before the annual audited financial statements – typically along with the SEC Form 10-Q, a quarterly unaudited report. Since current earnings are not known, interim dividends are paid from retained earnings (earnings accumulated from previous fiscal years). They are declared by the company’s board of directors, but the final approval comes from the shareholders.
How is interim dividend calculated?
The calcualtion of interim dividends is fairly simple it involves determining a proportion of the company’s earnings allocated to shareholders on a per-share basis.
Formula:
Interim dividend per share = (Earnings of the company x dividend payout ratio/Number of shares)
