Declaring Dividends in Singapore

Dividends are the portion of profits that companies pay to shareholders to reward them for investing in their companies, and believing in their long-term success. In this guide, we will explain how to declare dividends in Singapore, the differences between interim and final dividends, and the implications of declaring dividends.

How Do I Declare Dividends?

Only the company’s board of directors can declare a dividend.  

First, the directors will propose that a particular amount per share be paid as dividends. Shareholders then vote on this at the Annual General Meeting (AGM). The final dividends will be released after the shareholders' approval and confirmation that the company has profited in the published financial statements.

You will need the following documents to declare dividends:

• The approval of the shareholders
• The warrants issued to each shareholder

• The dividend registers
• The dividend vouchers
• The minutes of the meeting in which the company’s directors declared the dividends
• The resolution that authorized the payment of the dividends

Once the shareholders approve of the finalised dividends, it becomes a debt owed by the company to its shareholders that is immediately payable unless stated otherwise in the declaration. Such a declaration is irrevocable, and the dividend cannot be reduced.

A company can also pay interim dividends at any moment without shareholders’ approval. However, this requires the passing of a board resolution, which must be passed by the majority (I.e. more than 50%).  

Only final dividends create a debt that a company owes its shareholders. That said, if you want to keep your shareholders happy, it is best to honour the declaration of an interim dividend the same way you would a final dividend.

Four Key Dates in the Dividend Process

1. The declaration date, also known as the announcement date, is when the company’s board notifies shareholders and the market about its decision to pay dividends. As a result, this becomes the date when the company officially commits to paying a dividend.

2. The ex-dividend date is when a stock begins trading without the dividend. This date is important because shareholders must own the stock before the ex-dividend date to receive the declared dividend

3. The record date, which is usually around three business days after the ex-dividend date, notes down the period when the company determines which shareholders owned the stock before the ex-dividend date and are eligible to receive the dividend.

4. The payment date is when the company sends out dividend payments to shareholders. This is usually a month after the record date.

The Differences between Final and Interim Dividends

Interim dividends are a pleasant surprise to investors because they show that the company is performing well, so much so that it does not need to wait until the end of the year to pay dividends. Similarly, final dividends area strong signal to investors that the company is financially healthy.

A key disadvantage of interim dividends is that they can be cancelled with the consent of all shareholders. This is not the case with final dividends. Interim dividends also tend to be paid out at a lower rate than final dividends because the company does not know yet what its financial position will be at the end of the fiscal year.

What Are the Implications of Declaring Dividends?

Declaring and paying dividends incentivises new shareholders to buy your stocks and existing ones to keep them. However, dividends reduce your cash flow and limit your ability to reinvest funds into your company. If you are a high growth company, it might be better to wait until you are in the maturity phase before you start declaring and paying out dividends.

Sprout with Us!

Declaring dividends in Singapore may be different from what you are used to overseas. With Sprout Asia's budget-friendly accounting services, our experts can manage your finances and guide you through the whole dividend declaration process. Let us handle the backend work while you focus on what you do best.

If you have any queries about our services, feel free to reach out to us and we will answer within 24 hours.