Semiannual

What Is Semiannual?

Semiannual is an adjective that describes something that is paid, reported, published, or otherwise takes place twice each year, typically once every six months.

For example, a ten-year general obligation bond issued by the Buckeye City, Ohio Consolidated School District in 2020 will pay interest on a semiannual basis each year until the bond's maturity date in 2030. Investors who buy these bonds will receive interest payments twice in each of those years; in this case, once in June and once in December. The school district will also publish a semiannual report on its finances, once in February and once in November.

Understanding Semiannual

Semiannual is simply a word that denotes an occurrence twice a year. For example, a company could have company parties semiannually, a couple could celebrate their marriage semiannually, a family could go on vacation semiannually. Anything that happens twice a year happens semiannually.

If a corporation pays a semiannual dividend to its shareholders, the shareholders will receive dividends twice yearly. (A corporation can choose how many dividends to distribute each year — if any.) Financial statements or reports are frequently published on a quarterly (four times per year) basis. It is rare that corporations publish financial statements only semiannually. They do, however, publish an annual report, which per the definition, occurs once every year.

Semiannual is important to understand when purchasing bonds. A bond is usually described in the yield that it pays the bondholder. For example, a $2,000 bond could have a yield of 5%. It is important to know if this 5% is paid annually or semiannually to understand the payment you would receive as the bondholder.

For example, if the bond paid the yield annually, the bondholder would receive $100 a year. Now, if the bond paid the yield semiannually, the bondholder would receive $200 a year. This is an important distinction to note when purchasing bonds.

U.S. Treasury bonds pay a yield semiannually.

Semiannual vs. Biennial

While semiannual is an adjective that describes something that happens twice in a single year, biennial is a word that describes something that happens every other year. Understandably, biennial is often confused with the word biannual, which means the same thing as semiannual: something that happens twice per year.

Example of Semiannual

Company ABC has performed well in the last five years, continuously making a profit and growing earnings. The company decides it will start paying its shareholders dividends to distribute a portion of the earnings. ABC's management decides it will distribute a dividend of $0.50 for every share.

It also decides that the dividend will be distributed on a semiannual basis; the shareholders will receive one dividend payment of $0.50 twice a year for a total dividend amount of $1 for the year. The dividends will be distributed in June and in December.