November 29: Out of the 19 commercial banks listed in Nepal Stock Exchange Limited (NEPSE), 10 have announced to distribute dividends from their profits made in the last fiscal year (FY) 2079/80.
So far, NIC Asia Bank, Everest Bank, Standard Chartered Bank, Sanima Bank, Machhapuchhre Bank, Nabil Bank, Nepal SBI Bank, Global IME Bank, Citizens Bank and Siddharth Bank have declared dividends from the accumulated profits of the previous year.
Compared to last year, some banks have emphasized on cash dividends rather than bonus shares this year. Nabil Bank distributed 18.5 percent bonus shares and 11.5 percent cash dividend last year and proposed to give only 11 percent cash dividend this year. Siddharth Bank is giving 4.21% cash dividend, Citizens Bank International 5.79% and Standard Chartered Bank is giving 19% cash dividend. Similarly, Global IME Bank proposed to distribute 1 percent bonus shares and 8 percent cash dividend. Nepal SBI Bank announced to distribute 6.80 percent cash dividend and 3.75 percent bonus shares to the shareholders.
Six out of 10 commercial banks that declared dividends have already received approval from the annual general meeting. NIC Asia Bank, Everest Bank, Sanima Bank, Machhapuchhre Bank, Citizens Bank and Siddharth Bank have passed the proposal from the AGM. These companies have already released the dividends to the shareholders bank accounts. Now, 9 commercial banks listed in the secondary market of securities are yet to declare dividends.
Investors are divided whether listed companies should give cash dividends or bonus shares. Some people think cash dividend is fair while others think bonus share is better. Advocate Jyoti Dahal, an expert in the securities market, says that bonus share will not give anything qualitative except to increase the paid-up capital of the company while it reduces the net worth and reserves and gives a quantitative increase in the share of the shareholders.
“The announcement of bonus shares will increase the price of the shares abnormally for a few days, the operational and resource utilization expenses will increase to maintain the income due to the capital, but there will be no return qualitatively,” said Dahal, adding, “The cash I invested is for dividends. It is the same when it comes to share price after bonus shares are given.”
Investor SP Chaulagain also says that looking at the international stock market, the market prefers cash dividends over bonus shares. However, he says that there is a trend of giving more priority to bonus shares in the Nepali stock market.
In fact, cash dividends are good for the interests of investors and the long-term progress of the company. When the company gives cash dividend, the share price is not adjusted, investors get the dividend. And the net worth of the company remains good.
According to him, listed companies in other countries emphasize on cash dividends rather than bonus shares. It is not considered good to distribute bonus shares there. By issuing bonus shares, the liability and paid-up capital of the company increases.
He said that looking at the trend of the last few years, it seems that investors are making profits by short-term trading rather than from bonus shares. At various times, the regulatory bodies instructed the listed companies to increase the paid-up capital. As a result, companies are forced to raise capital through bonus shares and other means. For this reason, securities experts say that it is necessary to increase the reserve over the paid-up capital.