Highest Dividend Paying Stocks in Nepal 2020/ 2021

bonus shares are confusing to NEPSE investors

This article revolves around the highest dividend-paying stocks in Nepal in the recently concluded fiscal year. To learn about the dividend-paying procedure in Nepal, read this article.

Dividend Distributed for the Fiscal Year 2076/77

The following table lists all the dividend distributed for the recently concluded fiscal year 2076/77. The table can be sorted to find the highest and lowest bonus shares and cash dividend distributed for the fiscal year.

If the ticker symbols confuse you, hit the ticker on the company search bar of sharesansar.com to know which company it is.

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I have covered the dividend distribution process in great detail in this article. Nonetheless, these are some facts that are worth listing here:

  1. A company distributes cash dividend on the par value. For instance, if a company has a stock price of Rs. 500 and it distributes a 50% cash dividend, investors won’t get Rs. 250 as cash for every share they own. Rather, the par value of most companies in NEPSE is Rs. 100 irrespective of its stock price. In this case, an investor will only get Rs. 50 cash dividend per share.

Why you should not look only at a company’s dividend

Dividend proposals only do not give a good picture of a company’s performance. There are so many reasons behind this. Some of them are listed below:

1) You can’t compare the dividend of a company to that of another.

You really can’t compare the dividend of a company to that of another and determine the profit potential of one over another. For example, if company A has a price of Rs. 150 per share and it proposes a 50% cash dividend, you will have to invest Rs. 150 to get a return of Rs. 50, since a cash dividend is distributed on the par value (which we assume is Rs. 100 like most companies in NEPSE.) On the other hand, if company B has a price of Rs. 2,000 per share and it proposes a 100% cash dividend, you will have to invest Rs. 2,000 to get a return of Rs. 100.

Although the cash dividend percentage is more in company B, the actual return on investment is actually less. Thus, you can’t really compare the dividend of two companies.

2) You might be thinking that investing in higher-dividend paying companies will make you profitable.

However, investors already incorporate positive expectations in the stock price. So, if a company proposes a good dividend and you then buy its shares, maybe the existing share price already incorporated this positive expectation on the price. Maybe the price is already high enough.

3) It is not worth owning more of something that is worthless.

I have noticed that investors in Nepal put so much importance on bonus shares. A company declaring more bonus shares is taken as a good sign.

While that is true in most cases, it is not always the case. Just to clarify things for a beginner, bonus shares are distributed when a company wants to reinvest its profits without distributing cash dividends to its investors.

When you get bonus shares, you own more of the company. However, owning more of a business exposes you to more risks. If the company does not perform well and goes in a loss, you will be left holding a bunch of shares that are worth little or nothing.

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