Dividend Practices of Nepalese Development Banks in Nepal

Abstract

This study examines the dividend practices of three development banks in Nepal: Garima Bikas Bank, Jyoti Bikash Bank, and Kamana Sewa Bikas Bank. The analysis spans ten years, from the fiscal year 2070/71 to 2079/80, utilizing secondary data obtained from the annual reports of the respective banks and other sources such as SEABON, NEPSE, and NRB publications. The research investigates the relationship between dividend policies and key financial indicators, including Dividend Payout Ratio (DPR), Dividends Per Share (DPS), Earnings Per Share (EPS), Price-Earnings Ratio (PER), Dividend Yield (DY), and Market Price Per Share (MPS). The study reveals distinct dividend practices among the three banks. Garima Bikas Bank exhibited significant variability in EPS, DPS, and DPR, reflecting fluctuations in profitability and dividend payments. This variability suggests that Garima Bikas Bank may be a higher-risk investment but also one with the potential for higher returns. In contrast, Jyoti Bikas Bank and Kamana Sewa Bikas Bank demonstrated greater stability and consistency in their financial performance and dividend practices. Both banks showed steady growth in EPS and DPS, maintaining a constant DPR of 0.30. Correlation analysis revealed a strong positive correlation between MPS and EPS for all three banks, underscoring the crucial role of earnings performance in determining market valuation. MPS showed a moderate positive correlation with DPS and a weak positive correlation with DY, indicating that dividend payments and yields have a lesser impact on market price compared to earnings. The study concludes that consistent earnings and stable dividend practices are essential for maintaining investor confidence and achieving balanced market valuations. The findings provide valuable insights for investors, decision-makers, and researchers interested in the financial performance and dividend practices of development banks in Nepal.