Top 10 Dividend-Paying Stocks in Nepal
Roberto worked as a research analyst for a stock brokerage company and has been writing about the Nepali stock market since 2013.
Canva
The prices of stocks in the Nepal Stock Market are highly dependent on the anticipation of dividends the company propose. If a company has good growth prospects and has a history of providing back good dividends to its shareholders, it is always appreciated by the investors. Use this article to see which stocks have been providing the highest dividends in recent years and make your investment decision accordingly!
The stock market is designed to transfer money from the active to the patient.
— Warren Buffett
When Mr. Buffett said the above quote, he meant it. But what happens when you become patient and leave your stock investments aside? The answer is you make them grow naturally and without any interference. Whether by price action or by dividends, the value of those investments in the stocks grow. But not all stocks pay good dividends. Some stocks don't pay dividends at all. Here are some Nepali companies that have consistently given the highest dividends in the stock market.
Top 10 Dividend Stocks (FY 2020/21)
| Stock | Stock Dividend (%) | Cash Dividend (%) | Total Dividend (%) |
|---|---|---|---|
Unilever Nepal | 0 | 650 | 650 |
Nepal Lube Oil | 30 | 5 | 35 |
Sadhana Microfinance | 25 | 1.32 | 26.32 |
Swarojgar Microfinance | 25 | 0 | 25 |
Deprosc Microfinance | 20 | 1.053 | 21.053 |
Ngadi Group Power Limited | 20 | 1.05 | 21.05 |
Mirmire Microfinance | 20 | 0 | 20 |
Ruru Jalbidyut Pariyojana Limited | 10 | 10 | 20 |
Arun Kabeli Power Limited | 17 | 0.89 | 17.89 |
Api Power Company | 10.5 | 0.55 | 11.05 |
Top 10 Dividend Paying Stocks (FY 2019/20)
| Stock | Stock Dividend (%) | Cash Dividend (%) | Total Dividend (%) |
|---|---|---|---|
Unilever Nepal | 0 | 100 | 100 |
Himalayan Distillery | 50 | 50 | 100 |
Janautthan Samudayik Microfinance | 49.40 | 2.60 | 52 |
Nepal Telecon | 0 | 40 | 40 |
Radhi Hydropower Company | 36.50 | 0 | 36.50 |
Nabil Bank | 33.50 | 1.76 | 35.26 |
Forward Community Microfinance | 25 | 6.58 | 31.58 |
Womi Microfinance | 30 | 0 | 30 |
Shikhar Insurance Company | 27.769 | 1.462 | 29.231 |
How To Calculate Dividends in Nepal
Bonus Shares/Stock Dividend
Let's take an example from the table above. Womi Microfinance Company will be paying 30% stock dividend and no cash. So, if you have 100 shares of Womi, you are entitled to 30 additional shares free of cost.
Cash Dividend
Unilever Nepal has proposed 100% cash dividend. So, if you have 100 shares of UNL, you will receive 100% of its value i.e. Rs 10,000. Capital gains tax is deducted at source from this dividend.
Nepali Companies Give Either Stock Dividends or Cash Dividends
What Are Stock Dividends (Bonus Shares)?
Stock Dividends, also called Bonus Shares, are dividends paid in the form of new shares. If you are an existing shareholder of the company, you are entitled for additional shares. Bonus shares are given when the company re-invests in itself and is looking for more growth. In case of Banks and Insurance companies, bonus shares are issued also when they have to meet a certain regulatory requirement. For example: reaching a certain paid-up capital requirement, maintaining a certain Capital Adequacy Ratio against risky assets etc.
How Are Bonus Shares Given?
Bonus shares are announced as percentage of paid-up capital. If a company announces 10% bonus shares, it means that it will issue 1 new share for every 10 paid-up shares of the company. So, if you have 100 shares of the company on its book closure day, the company will pay you 10 shares. Yes, for free! (minus capital gains tax).
What Are Cash Dividends?
Cash Dividend is the simplest form of dividend payment. It's in the form of cash and is directly deposited to your bank account. They are also calculated on the same basis. If a company declares 10% cash dividend and you have 100 shares, you are entitled to get 10% of the value of those 100 shares.
Keep in mind that the value of those shares are paid-up value or par value. This is not the value of those shares as per the per share market price. Since the majority of shares in Nepal Stock Market have par value of Rs 100 per share, this is the dividend calculation:
- Value of the shares: 100 shares x Rs 100 = Rs 10,000
- Dividend = 10% of Rs 10,000 = Rs 1,000
Hence, the company will pay you Rs 1,000 (minus dividends tax)
Rs 100 is generally the IPO price of any company in Nepal stock market. For mutual funds and Soaltee Hotels (SHL), the par value is Rs 10 per share.
Test Your Dividend Calculation Knowledge
For each question, choose the best answer. The answer key is below.
- You have 1,000 shares of NIBL Samriddhi Fund-1 (a mutual fund) and it provides 20% cash dividend. Before taxes, you get:
- Rs 200 as cash dividend
- Rs 2,000 as cash dividend
- Rs 20,000 as cash dividend
- Rs 200,000 as cash dividend
Answer Key
- Rs 2,000 as cash dividend
Top 10 Dividend-Paying Stocks (FY 2018/19)
| Stock | Stock Dividend (%) | Cash Dividend (%) | Total Dividend (%) |
|---|---|---|---|
Unilever Nepal | 0 | 770 | 770 |
Himalayan Distillery | 50 | 52.63 | 102.63 |
National Microfinance Company | 75 | 5 | 80 |
Mirmire Microfinance Company | 45 | 2.36 | 47.36 |
Suryodaya Microfinance Company | 44.47 | 2.34 | 46.81 |
Forward Microfinance Company | 32.5 | 12.5 | 45 |
Deprosc Microfinance Company | 30 | 15 | 45 |
Nepal Telecom | 0 | 45 | 45 |
Chhimek Microfinance Company | 27.11 | 17.21 | 44.32 |
When Are Dividends Paid?
Dividends are paid after the company conducts its yearly shareholders' meeting, also known as Annual General Meeting (AGM). Once the AGM endorses the dividends, they are paid out. Cash dividends often arrive sooner in the respective bank accounts of the shareholders whereas bonus shares take a few months to arrive. The schedule of AGM is supposed to be published on a national daily newspaper at least 15 days before the meeting day.
The bank account is the one the shareholder gave when opening the "Demat" account. Bonus shares come directly to the said demat account.
This article is accurate and true to the best of the author’s knowledge. Content is for informational or entertainment purposes only and does not substitute for personal counsel or professional advice in business, financial, legal, or technical matters.
© 2020 Roberto Eldrum
