Nepal's Dividend Season Commences: Mutual Funds Lead Declarations, Followed by Hydropower and Development Banks

The much-anticipated dividend season has officially begun in Nepal's capital market, with mutual funds taking the lead in announcing their returns for the recently concluded fiscal year. This initial wave of declarations from both open-ended and close-ended mutual funds is setting the tone for what promises to be a busy period for investors, as development banks and hydropower companies are quickly following suit.

Among the open-ended mutual funds, Siddhartha Capital's Siddhartha Systematic Investment Scheme (SSIS) initiated the dividend announcements by proposing a 3% cash dividend to its unitholders. This rate, while a positive return, is notably in line with or slightly below the interest rates currently offered by commercial banks on savings accounts, which typically range from 2.75% to 3.5%. Following SSIS, Kumari Capital's Kumari Sunaulo Lagani Yojana declared a 4.7% cash dividend, while NMB Capital's NMB Saral Bachat Fund–E announced a 5.25% cash dividend. It's important for investors to remember that open-ended mutual funds are not traded on the NEPSE platform; instead, their transactions occur at designated locations and platforms specified by the respective capital managers, based on the previous day's Net Asset Value (NAV).

The trend of dividend declarations is not limited to open-ended schemes. Close-ended mutual funds have also started unveiling their cash dividends. Machhapuchchhre Capital's Machhapuchchhre Equity Fund has proposed an 8% dividend. Kumari Capital's close-ended funds have been particularly generous, with Kumari Equity Fund and Kumari Dhan Vriddhi Yojana each declaring a 10% cash dividend, while Kumari Sabal Yojana offered 2.90%. Siddhartha Capital's Siddhartha Investment Growth Scheme–2 and Siddhartha Investment Growth Scheme–3 announced 8% and 10% cash dividends, respectively. NMB Capital's close-ended funds also saw declarations, with NMB 50 proposing 3.15%, NMB Hybrid Fund L–2 at 4.5%, and NMB Sulabh Investment Fund–2 at a notable 10%. Additionally, Reliable Samriddhi Yojana, managed by Reliable Investment & Merchant Capital (a subsidiary of Reliable Nepal Life Insurance), declared an 8.4211% dividend.

This year's mutual fund dividend declarations appear to cap at a maximum of 10% cash dividend. This stands in stark contrast to the previous year, when several mutual funds offered significantly higher returns. For instance, Sanima Large Cap, managed by Sanima Capital, declared an impressive 21.05% dividend last year. Similarly, Laxmi Unnati Kosh, Siddhartha Equity Fund, RBB Mutual Fund, and Siddhartha Investment Growth Scheme–2 all announced dividends exceeding 20%. The current lower average for mutual funds could reflect a more challenging market environment or a shift in fund management strategies aimed at capital preservation rather than aggressive distribution.

Beyond mutual funds, other corporate entities are also beginning to announce their dividends, signaling the conclusion of their financial audits. The hydropower sector has seen Mandu Hydropower propose a 12% cash dividend to its shareholders. In the development banking sector, Kamana Sewa Bikas Bank has put forward an attractive 15% cash dividend, while Shangrila Development Bank has delighted investors with a total dividend of 10.52%, comprising a 4% bonus share and a 6.52% cash dividend.

As the festive season approaches, the pace of dividend announcements is expected to intensify. Investors are eagerly anticipating declarations from commercial banks, microfinance institutions, and other manufacturing companies. All 20 commercial banks operating in Nepal have already published their unaudited financial statements for the fourth quarter of the recently concluded fiscal year, revealing a mixed performance across the sector. These upcoming announcements will provide further clarity on the overall health of the market and the profitability of various sectors, influencing investor sentiment and market dynamics in the coming months.