Proposed Dividend vs Dividend Payable: Difference and Comparison

A Dividend is stated as earnings from the profits of a company that isn’t kept paid by the owner, which depends on the company’s self-owned equity instead of their contribution.

A Dividend is a payment initially decided at the end of a financial year, which is later approved by the board of directors.

Key Takeaways

  1. The proposed dividend is the announcement of a dividend that a company plans to pay to its shareholders, while the dividend payable is the actual payment of the announced dividend.
  2. The company’s board of directors announces the proposed dividend, while the dividend payable is distributed to shareholders according to the company’s payment schedule.
  3. The proposed dividend is a non-binding declaration until it is approved by the company’s shareholders, while the dividend payable is a binding obligation once the company declares it.

Proposed Dividend vs Dividend Payable

The difference between a proposed dividend and a dividend payable is that the company’s management decides a proposed dividend for the share, which is to be paid by the company’s shareholders. On the other hand, A Dividend payable is the dividend paid to the shareholders, finalized in annual general meetings.

Proposed Dividend vs Dividend Payable

A proposed dividend is a dividend distributed to the company’s shareholders, which is due in a financial year for a specific year. A proposed dividend is an essential feature for financing temporary working capital for the taxation of a company.

Dividend payable is the money or share from the profits earned from the company, which is stated and kept as the dividend by the company’s board of directors. When such a decision is taken, paying the decided amount to the company’s shareholders is mandatory.

Comparison Table

Parameters of comparisonProposed DividendDividend Payable
Announcement of the dividendMade by the management of the companyMade by the board of directors of the company.
Interest rateThe interest rate is low.The interest rate is high as compared to the proposed dividend.
Announcement timeAfter the financial statements have been preparedUntil the financial statements are prepared.
WIithdrawalThis dividend cannot be withdrawn.This can be withdrawn by agreement between the members.
Article of associationIt is not mentioned in the article of association.It is mentioned in the article of association.

What is a Proposed Dividend?

The proposed dividend is under contingent liability in the balance sheet. A proposed dividend is essential to finance temporary workings capital for taxation.

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This dividend also acts as finance that helps fill the gap between proposed and distributed dividends. The proposed dividend is essential for financing to cost through an offered dividend without cost.

Utilizing such a kind of dividend does not require any legalities for a company. This kind of proposed dividend does not even involve any issue-related cost too.

The main advantage of a proposed dividend for a company is that it is a very cheap source to finance provisions like taxation for a person’s company. This kind of dividend also doesn’t include or require any obligation to pay interest on the company’s part.

The disadvantage of the proposed dividend is that this kind of dividend is suitable only for a short period of finance. The amount of finance allowed or bought through this kind of dividend is less valuable than other dividends to be stated in a company.

proposed dividend

What is Dividend Payable?

Dividend playable is said to be under current liabilities in a company’s balance sheet. A dividend payable is the dividend the company’s shareholders approve in the annual general meetings. This dividend has to be paid by the company within specific due dates.

The calculation of these shares varies from a different classes of shares, depending on their preference. The divide payable should be paid to the bank partners authorized under the company’s obligation.

Dividend playable is said to be under current liabilities in a company’s balance sheet. A dividend payable is the dividend the company’s shareholders approve in the annual general meetings. This dividend has to be paid by the company within specific due dates.

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The calculation of these shares varies from a different classes of shares, depending on their preference.

This kind of Dividend is considered a liability of an odd type. This is because this dividend must pay its shareholders while other company liabilities are done to separate outside parties such as lenders. Dividends payable must be considered a valid liability of a company.

This dividend makes it possible to have high liquidity of profit for the company since it implies that it has a good year.

Main Differences Between Proposed Dividend and Dividend Payable

  1. The management announces the Proposed dividend of the company, and on the other hand, the dividend payable is decided by the company’s board of directors.
  2. The dividend rate is less in the proposed dividend, whereas it’s comparatively higher in the case of dividend payable.
  3. The proposed dividend isn’t mentioned in the article of association, whereas the dividend payable is mentioned in the article of association.
  4. A proposed dividend cannot be withdrawn when needed, but a Dividend payable can be withdrawn with an agreement between the owners.
  5. The proposed dividend is announced after the financial statements have been prepared, whereas the dividend payable is declared until the financial statements are prepared.
References
  1. https://pdfs.semanticscholar.org/ff98/ac88d0910c1822b2dd284ab7c8da4a384d15.pdf
  2. https://journal.unnes.ac.id/sju/index.php/maj/article/view/23030

Last Updated : 11 June, 2023

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27 thoughts on “Proposed Dividend vs Dividend Payable: Difference and Comparison”

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