Cash, dividends, bonus and right shares
लाभांश, बोनस सेयर र हकप्रद सेयर: मूल्य समायोजन सहित
Profit on paper and cash in the bank are not the same thing. On NEPSE, how a company pays you - cash dividend, bonus shares or a right issue - matters as much as how much.
Profit is an opinion, cash is a fact
Accounting profit includes things that haven't turned into money yet - sales made on credit, for example. The cash-flow statement shows the real rupees moving in and out, in three groups:
- Operating cash flow - cash from running the business. For a healthy company this is positive and roughly tracks profit.
- Investing cash flow - cash spent on new outlets, plants and machines (usually negative for a growing company).
- Financing cash flow - cash from new loans or shares, and cash paid out as dividends and loan repayments.
A company that reports a profit every year but whose operating cash flow is negative year after year is not turning its profit into money. Sometimes customers simply aren't paying; sometimes the profit was never real. Either way, find out before you buy.
Three ways NEPSE companies "reward" you
1. Cash dividend - real money
The company pays part of its profit to shareholders. Sagarmatha Momo earns Rs 30 per share and pays Rs 12 in cash: a payout ratio of 40%, keeping the rest to open new outlets. The Rs 12 lands in your bank account (after a small dividend tax withheld at source).
2. Bonus shares - more slices of the same cake
A 20% bonus means you get 20 new shares for every 100 you hold - free. It feels like a gift, but the company hasn't given you anything new: the same business, the same profit, now cut into 20% more pieces. That's why the share price is adjusted down after the book closure.
3. Right shares - a request for money
A right issue lets existing shareholders buy new shares, usually at Rs 100 each, in proportion to what they own. It isn't a reward - the company is asking you for money. It can be a good deal (if the company will use it well) or a sign that it needs capital to meet regulations or cover problems.
The price adjustment, with the formula
On the book-closure date NEPSE adjusts the price so that nobody gains or loses just from the new shares:
| Event | Adjusted price | Example |
|---|---|---|
| Bonus share | Price ÷ (1 + bonus %) | Rs 600 with a 20% bonus → 600 ÷ 1.20 = Rs 500 |
| Right share | (Price + ratio × issue price) ÷ (1 + ratio) | Rs 600, 1:2 right at Rs 100 → (600 + 0.5 × 100) ÷ 1.5 = Rs 433 |
On an unadjusted chart, the adjustment looks like a sudden 17% or 28% fall. It isn't selling - it's arithmetic. Many beginners panic-sell the next day, or see a "breakdown" that never happened. Always check for a book closure before reading anything into a big gap down.
Dividend yield: is the payout worth it?
Dividend yield = cash dividend per share ÷ share price. Sagarmatha Momo pays Rs 12 on a Rs 450 share: a 2.7% yield. Compare that with what a fixed deposit pays. If a bank FD pays 7% with no risk, a share yielding 2% has to make up the difference through growth - or it isn't worth it for an income investor.
- Look at the history, not one year. A company that has paid a cash dividend every year for ten years is more reliable than one big payout.
- Check it's affordable: a payout ratio above 100% means paying out more than it earns - it can't last.
- Count only the cash when comparing yields. Bonus shares don't put money in your account.
See it live on MacroLens NP
Everything in this lesson, worked out on real NEPSE data for every listed company - inside the MacroLens NP desk.
Lesson summary
- Cash flow shows real money moving; a profit that never turns into cash is a warning.
- A cash dividend is real money; a bonus share just cuts the same cake into more pieces.
- After a bonus or right share book closure the price is adjusted down - it isn't a crash.
- Dividend yield = dividend per share / price: compare it with what a fixed deposit pays.
Create a free account to keep reading
Lesson 1 is open to everyone. From here on, the course is still completely free - we just ask for an account so we can save where you stopped, keep your quiz scores and let you pick up on any device.
No card, no payment. 13 more lessons, 123 minutes in all.
Education only, not investment advice: nothing here tells you to buy or sell any share. Investing carries risk - you can lose money. Examples use made-up companies unless a real one is named.