DIVIDEND POLICY OF HIMALAYAN BANK LIMITED

A Project Work Report

Submitted by:
Diwakar Ale Magar
TU Regd. No. 7-2-455-18-2019
Pinnacle College
Lagankhel, Lalitpur

Submitted to:
Faculty of Management
Tribhuvan University
Kathmandu, Nepal

In partial fulfillment of the requirement for the Degree of

BACHELOR OF BUSINESS STUDIES (BBS)

Lalitpur, Nepal
April, 2024

i
 DECLARATION

I hereby declare that this project work entitled “DIVIDEND POLICY OF HIMALAYAN BANK
LIMITED'' submitted to the Faculty of Management, Tribhuvan University, Kathmandu is an
original piece of work under the supervision of Mr. Nirmal Tiwari, faculty member of Pinnacle
College, Lalitpur, and is submitted in partial fulfillment of the requirements for the award of the
degree of Bachelors in Business Studies (BBS). This project work has not been submitted to any
other university or institution for the award of any degree or diploma.

………………………….

Diwakar Ale Magar

April 2024

ii
SUPERVISOR'S RECOMMENDATION
The project work report entitled “DIVIDEND POLICY OF HIMALAYAN BANK LIMITED''
submitted by Diwakar Ale Magar of Pinnacle College; Lagankhel is prepared under my
supervision as per the procedure and format requirements laid by the Faculty of
Management, Tribhuvan University, as partial fulfillment of the requirements for the degree of
Bachelor of Business Studies (BBS).

I, therefore, recommend the project work report for evaluation.

……………………………..

Diwakar Ale Magar

April 2024

iii
ENDORSEMENT
We hereby endorse the project work report entitled “DIVIDEND POLICY OF HIMALAYAN
BANK LIMITED'' submitted by Diwakar Ale Magar of Pinnacle College; Lagankhel in partial
fulfillment of the requirements for the degree of the Bachelor of Business Studies (BBS) for
external evaluation.

………………………………………. ….…………………………………

Mr. Atma Ram Koirala Dr. Rishi Pd. Tiwari

Chairman, Research Committee Campus Chief
April, 2024 April, 2024

iv
 ACKNOWLEDGEMENT

This report has been prepared for the partial fulfillment of the requirement of the degree of
Bachelor of Business Studies. It would have been almost impossible to complete this without
cooperation and help from different persons.
At first, I would like to express my sincere gratitude and deep respect to my Mr. Nirmal Tiwari,
faculty members of Pinnacle College, for his valuable suggestions, guidance, and encouragement
in the completion of this study.
I would like to express thanks to all the library and administrative staff of Pinnacle College for
the necessary help in the preparation of this report. I must not forget to thank my friends and
colleagues for the regular inspiration and support.

Diwakar Ale Magar

April, 2024

v
 TABLE OF CONTENTS

Title page i

Declaration ii

Supervisor’s Recommendation iii

Endorsement iv

Acknowledgement v

Table of contents vi

List of Tables viii

List of figures ix

Abbreviations x.

CHAPTER I: INTRODUCTION 1

1.1 Background Study 1-3

1.2 Profile of Organization 3
1.3 Statement of Problem 4
1.4 Objective of Study 4
1.5 Rationale of the Study 5
1.6 Research methods 5
1.6.1 Research design 5
1.6.2 Population Sample 5
1.6.3 Type of Data 6
1.6.4 Data Collection Procedure 6
1.6.5 Technique of Analysis 6-9
1.7 Research Gap 9
1.8 Literature review 9
1.8.1 Conceptual Framework 10
1.8.2 Forms of Dividend 10-11

vi
 1.8.3 Review of Previous Study 11-12
1.9 Limitation of Study 12

CHAPTER II: RESULT AND ANALYSIS 13

2.1 Analysis of data 13-20

2.2 Major Findings 21

CHAPTER III: SUMMARY AND CONCLUSION 22

3.1 Summary 22
3.2 Conclusion 24

BIBLIOGRAPHY
APPENDICES

vii
 LIST OF TABLES

Table 2.1 EPS of Himalayan Bank Limited……………………………………13

Table 2.2 DPS of Himalayan Bank Limited……………………………………15

Table 2.3 DPR1 of Himalayan Bank Limited…………………………………..16

Table 2.4 MPS of Himalayan Bank Limited……………………………………17

Table 2.5 DY of Himalayan Bank Limited……………………………………..18

Table 2.6 P/E Ratio of Himalayan Bank Limited……………………………….20

viii
 LIST OF FIGURES

Figure 2.1 EPS of Himalayan Bank Limited………………………………..14

Figure 2.2 DPS of Himalayan Bank Limited………………………………..15

Figure 2.3 DPR of Himalayan Bank Limited……………………………….16

Figure 2.4 MPS of Himalayan Bank Limited……………………………….17

Figure 2.5 DY of Himalayan Bank Limited…………………………………19

Figure 2.6 P/E Ratio of Himalayan Bank Limited………………………….20

ix
 ABBREVIATIONS

HBL Himalayan Bank Limited

EPS Earning Per Share
DPS Dividend Per Share
DPR Dividend Payout Ratio
MPS Market Price of Share
DR Dividend Ratio
DY Dividend Yield
MVPS Market Value Price per Share
NWPS Net Worth Per Share
NEPSE Nepal Stock of Exchange
ATM Automated Teller Machine
BBS Bachelor of Business Studies
P/E Price Earning
SEBON Security Board Nepal
TU Tribhuvan University
S. D Standard Deviation
C.V Coefficient of Variance

x
 CHAPTER I

INTRODUCTION

1.1Background of the Study

Dividends represent a portion of a company's profits distributed to its shareholders as a reward

for their investment. A well-structured dividend policy not only attracts investors but also signals
financial stability and confidence in the company's future prospects. It is essential to strike a
balance between distributing profits to shareholders and retaining earnings for future growth
opportunities. A well-designed dividend policy is essential for creating value for shareholders
and maintaining the company's financial stability and growth prospects. By adopting a strategic
approach to dividend policy, the company can enhance shareholder confidence, attract
investment, and drive sustainable long-term value creation. Financial institutions can be
considered as the catalyst to the economic growth of a country. The development process of a
country involves the mobilization and development of resources. Development of trade,
commerce and industry are the prime requisite for the attainment of the economic, political and
social goals. To fulfill the purpose of planning, financial functions more often dominate the other
functions. “There is always a lack of finance in an underdeveloped economy because nature is
either underutilized or unutilized in productive sectors or even other purposes i.e., social welfare
and so on. Likewise, underdeveloped countries are not deficient in land, water, mineral, forest or
power resources, though they may be untapped; constituting only ‘potential resources." So, in
these countries for the rapid development of the economy, there should be proper mobilization of
resources. Due to various difficulties or even ignorance of the people, such resources have not
been properly utilized. Hoarding could be one of the reasons for this. So, banks and other
financial institutions play a vital role to encourage thrift and discourage hoardings by mobilizing
the resources and removing the habit of hoarding. They pursue rapid economic growth,
developing the banking habit among the people, collecting the small-scattered resources in one
bulk and utilizing them for future productive purposes and rendering other valuable services to
the country. Thus, this gives the individuals an opportunity to borrow funds against future
income, which may improve the economic well-being of the borrower. Financial institution in

1
the economy plays a crucial role in the process of economic growth of the country. Financial
institution refers to a business concern which is mainly confined to finance for the development
of trade, commerce and industry. Trade, commerce and industry are the prime factors of
economic development.
The background study of dividend policy in Nepal delves into the intricate interplay of historical,
regulatory, market, and cultural factors shaping dividend decisions among Nepalese companies.
Tracing the evolution of dividend practices in Nepal provides insights into the economic
development trajectory, political landscape, and regulatory reforms that have influenced
corporate payout policies over time. Analysis of the regulatory framework governing dividend
distributions, overseen by entities like the Securities Board of Nepal (SEBON) and the Nepal
Rastra Bank (NRB), sheds light on the legal landscape shaping dividend decisions. Moreover,
exploring market dynamics and corporate governance practices reveals how factors such as
industry trends, macroeconomic conditions, and shareholder rights impact dividend policy
formulation. Cultural norms and attitudes towards wealth distribution and investment further
shape dividend practices, especially within the context of family-owned businesses and
conglomerates prevalent in Nepal. Despite facing challenges such as limited access to capital and
regulatory uncertainties, Nepalese companies have opportunities to enhance dividend policy
effectiveness through improved governance practices, investor relations, and long-term
sustainability strategies. This comprehensive background study lays the foundation for informed
decision-making and policy initiatives aimed at strengthening dividend policy frameworks in
Nepal, ultimately contributing to the country's economic development and investor confidence.
Dividend policy is concerned with financial policies regarding paying cash dividend in the
present or paying an increased dividend at a later stage. Whether to issue dividends, and what
amount. is determined mainly on the basis of the company's unappropriated profit (excess cash)
and influenced by the company's long-term earning power. When cash surplus exists and is not
needed by the firm, then management is expected to pay out some or all of those surplus earnings
in the form of cash dividends or to repurchase the company's stock through a share buyback
program. This is a study on effects of dividend policy on the value of the firms. There are three
important decisions a firm must make investment, financing and dividend decisions. All these
decisions are normally made with the aim of achieving the overriding objectives of firms, which
is the maximization of shareholder’s wealth. This study investigated the effect of dividend policy

2
on the value of the firm. It examined the relationship between dividend payment and payout
ratio. It found out the percentage of earnings to be retained or ploughed back into the company
and identified the various factors that determine the pricing of shares. Secondary data obtained
from Nigeria Stock Exchange Fact book were used for the study. The study finds out among
other things that the changes in the payout ratio of a company significantly determine the
changes in the value of the company. It was therefore recommended in the study that the policy
of regular dividend payout should not be changed arbitrarily since it has a serious effect on the
investor's attitude and the financial standing of the organization. The result has a clear
implication for investing in the public. government policy makers and the firm's management.
Keywords: Dividend policy; Dividend decision: Payout ratio: company’s valuation; investment.
According to law, dividends should be declared out of the net profit. Usually, dividends are paid
annually. Semiannually, quarterly. or monthly. In Nepal dividend is paid annually, some
companies may pay the whole earning as dividend to create a good image in the market at the
beginning but later they may change their policy and announce a certain percentage of dividend
payout term but usually dividend policy ratio seems to 40° in Nepal. Dividend policy is the
policy which concerns the quantum of profits to be distributed by way of dividend. This policy
implies that the companies introduce a pattern of dividend payment through their Board of
Directors which, no doubt, has an implication on the future activities although in practice, this
procedure is not followed by most of the companies. They simply consider each dividend
decision in an independent manner. This is primarily due to the fact that the financial manager
cannot do anything about it since he works at an advisory capacity. The power to recommend
dividend policy and declaration of dividends vest completely in the Board of Directors.

1.2 Profile of Organization

Himalayan Bank. was established in 1993 in joint venture with Habib Bank Limited of Pakistan.
Despite the tough competition in the Nepalese Banking sector, Himalayan Bank has been able to
maintain a lead in the primary banking activities Loans and Deposits. Legacy of Himalayan lives
on in an institution that's known throughout Nepal for its innovative approaches to
merchandising and customer service. Products such as Premium Savings Account, HBL
Proprietary Card and Millionaire Deposit Scheme besides services such as ATMs and Tele-
banking were first introduced by HBL. Other financial institutions in the country have been

3
following the lead by introducing similar products and services. Therefore, the bank stands for
the innovations in this country to help their Customers besides modernizing the banking sector.
With the highest deposit base and loan portfolio amongst private sector banks and extending
guarantees to correspondent banks covering exposure of other local banks under their credit
standing with foreign correspondent banks, HBL believes that they obviously lead the banking
sector of Nepal. The most recent rating of HBL by Bankers ‘Almanac as the country's number 1
Bank easily confirms our claim.

1.3 Statement of Problem

The analysis of financial statements is useful for further research work and also to the institution
itself. The research will deal with many problems like, what is the profitability, liquidity, capital
structure, economic situation of our country, difference between current asset and current
liabilities. Dividend policy being one of the major decisions to be taken by firms which has not
become a known phenomenon or a matter or practice to a larger number of financial
communities even today. In Nepal different companies seem to hold different policies regarding
dividend every year. Dividend distribution does not match with the earnings of the companies.
The main focus of the study is to deal with the following problems-

● Is DPS appropriate to the firm's EPS?

● What is the impact of dividend policy on market price of stock?

● Is there any consistency in EPS, DPS and DPR of the HBL?

1.4 Objective of the Study

The major objective of the study is to obtain the depth knowledge about the impact of dividend
policy adopted by the firms to its market price of share as well as the overall valuation of the
firm. The following are the specific objectives of this study.

● To examine the dividend policy of Himalayan Bank Limited.

4
 ● To determine the prevailing policies and practices regarding dividend in the Nepalese

firms with reference to the Himalayan Bank Limited.

● To identify if there is any uniformity in DPS, EPS, MPS and DPR of the Himalayan Bank

Limited.
1.5 Rationale of Study

The dividend is most sensitive in the area of investment in the common stock. If the market
doesn't receive its expected dosages, stock price will suffer. Dividend payout of course reduces
the amount of earning retained in the firm and affects the total amount of internal financing. The
study may deliver crucial information for those respective commercial banks. The main
significance of study is as follows;
The study aims to provide important and useful information to the investor. It will be useful for
management. It will be useful for stock brokers, financial agencies, policy makers and various
stakeholders. This study helps to formulate dividend policy to policy makers while making their
dividend policy. This study will be beneficial to those parties who are directly or indirectly
related to the financial institution. This study covers the partial fulfillment of the requirement of
BBS, T.U.

1.6 Research Methods

Research Methodology indicates the methods and processes employed in the entire aspect of the
study. In other words, research methodology refers to the various sequential steps to be adopted
by a researcher in studying a problem with certain objectives. Research methodology 1 st way for
systematically solving the research problem. So, it is a way of presenting the collected data with
meaningful analysis. In other words, it is a systematic way to find research problems.

1.6.1 Research Design

The research design of this study basically follows the impact of dividend on stock price. In
other words, this research is designed so as to find out the impact on the market price of common
stock of a company when dividend is paid to the shareholders and also how the market price of
stock responds when dividend is not paid to the shareholder. In other words, the study is closely
related to the impact of dividend on market price of common stock and wealth position of

5
shareholders. Therefore, the descriptive as well as the analytical approach design are adopted
here to make the analysis more effective. financial tools, statistical tools and testing models are
also used.

1.6.2 Population Sample

There are 20 commercial banks in the country owned, due to time and resource factor it is not
possible to study all of them regarding the study topic. Therefore, sampling will be done
selecting from population. Out of 20 commercial banks that are operating their activities in
Nepal, researchers have selected only one commercial bank for this study. So, we are going to
analyze only HBL about their operating activities as a sample.

1.6.3 Types of Data:

This study is based on the secondary data. The data relating to the dividend decision, which are
directly obtained from commercial banks. Annual reports, balance sheets, profit and loss
accounts of commercial banks are the main sources of data. Beside the data are also collected
from various journals, articles, newspapers and magazines published by commercial firms. Main
sources of secondary data are:

● Annual report published by Himalayan Bank Limited.

● Data are collected for the year 2015/16 to 2020/2021 as five-year data are analyzed.

● Nepal Stock Exchange, website (www.nesalstock.com) and perspective firm's

● official websites.

1.6.4 Data Collection Procedure.

The data analysis tools are applied as simply as possible. Data obtained from the various sources
cannot directly be used in their original form. They need further verified sources that cannot
directly be used in their original form. They need to be further verified and simplified for the

6
purpose of analysis. Data, information, figures and facts so obtained need to be checked,
rechecked, edited and tabulated for computation. According to the nature of data, they have been
inserted in meaningful Tables, which have been shown in appendices. Data have been analyzed
and interpreted using financial and statistical tools.

1.6.5 Technique of Analysis:

Various Financial and Statistical tools have been used to analyze the data of this study.
1.Financial Tools
Financial tools are those which help to study the financial position of the firms. The financial
tools used in this are as follows:

a) Earnings Per Share (EPS)

The profit made by the common shareholders for every share they owned is known as
earning per share. The income of per share is calculated by dividing the earning available to
common shareholders by the total number of common stock outstanding, Thus,
¿
EPS = Earning available¿ common shareholders no . of common stock outstanding

b) Dividend Per Share (DPS)

Dividends are the portion of the net profit investor received as a benefit t by the shareholders
as a return on investment or cash. Amounts of net profit after tax are available to the
shareholder which is received by the shareholders as a dividend. The portion of net profit
which is allocated to the shareholders divided by the number of shares outstanding is known
as dividend per share. They are calculated by:
Total dividend
DPS = no . of common stock outstanding

c) Dividend Payout Ratio (DPR)

The percentage amount of dividend paid to shareholders out of earning per share is known as
dividend payout ratio. This earning is needed for business to grow and to expand. The
purpose of calculating this ratio is to: know the portion of dividend distributed out of total

7
 earnings. This ratio shows the relation between the returns belonging to equity shareholders
and the dividend paid to them. It can be calculated as under:
DPR = Dividend per share
Earnings per share

d) Dividend Yield (DY) Ratio

The dividend yield is an estimate of the dividend-only return of a stock investment.
Assuming the dividend is not raised or lowered. the yield will rise when the price of the stock
falls, and it will fall when the price of the stock rises. Because the dividend yield changes
with the stock's price, it often looks unusually high for stocks that are falling quickly. It
defined the relationship
between dividend per share and market value per share. It is very useful for the investors. So,
dividend yield is the dividend received by the investors as a percentage of market price per
share in the stock market. Thus,
Dividend Yield Ratio= Dividend per share
Market price per share

e) Price Earnings Ratio (P/E)

Price earnings ratio is the ratio for valuing a company that measures its current share price
relative. This ratio is closely related to the earning yield. The reciprocal of the earning yield
is called the price earnings ratio. It is very useful to prospective investors. The higher P/E
ratio is the high market price of a stock given the earning per share and greater confidence of
investors in the future. Thus,
P/E Ratio = Market Price per share
Earning per share

2. Statistical Tools
a) Mean
An average is a single value selected from a group of values to represent them in the same
way. which is supposed to stand for the whole group of which it is a pair, as typical of all the
values in the group. It is the most commonly used and readily understood measure of central

8
 tendency. Arithmetic mean of a given set of observations is their sum dividend by the
number of observations.
Mathematically: Arithmetic Mean (AM) is given by,
x̄ = X
n
Where,
x̄ = Arithmetic mean
X = Sum of all the values of variable X
n = Number of observations

b) Standard Deviation
Standard deviation (SD) represented by the Greek letter sigma(σ) is a measure that is used to
quantify the amount of variation or dispersion of a set data value. It is the most commonly
used measure of the spread or dispersion of data around them. A low standard deviation
indicates that the data points tend to be close to the mean (also called the expected value) of
the set, while high standard deviation indicates that the data points are spread out over a
wider range of values.
The standard deviation (σ) measures the absolute dispersion.
Mathematically,
σ=

c) Coefficient of variance
Although the standard deviation of analytical data may not vary much over limited ranges of
such data it usually depends on the magnitude of such data. The standard deviation is
absolute measures of dispersion; whereas the coefficient of variation (CV) is a relative
measure. To compare the variability between two or more series, CV is a more appropriate
statistical tool.
Mathematically,

CV

1.7 Research Gap

9
 Research gap refers to the gap between previous research and this research. Many research
studies have been conducted by the different students, experts and researchers about the
dividend policy of commercial banks. By the depth and detail study of above cases there are
many lacks of and unclear information in many cases. I request they should be given more
samples while conducting the research program.
1.8 Literature Review
Review of literature is a summary and analysis of knowledge about a particular topic or area of
inquiry. It is the process of reviewing research studies or other relevant propositions in the area
of the study so that the past studies, their conclusion and deficiencies may be known and further
research can be conducted. It analyses the previous studies for knowing about the data provided
in detail which further helps to develop a theoretical framework.

1.8.1 Conceptual Framework

The term dividend can be defined as the profit made by the firm which is distributed to its
shareholders’. Although the firm makes the profit, it should decide whether to retain the money
for further investment or to distribute it among the shareholders. It may be in cash or share or the
combination of both the cash and share. In simple words dividend can be defined as the return on
investment.

Dividend policy decision is one of the three decisions of financial management because it affects
the financial structure, the flow of funds, corporate liquidating and investors attitudes. For a good
dividend policy management must decide, whether to distribute the dividend or to retain the
fund. The dividend might result in immediate cash flow to the investor but by retaining the fund
it provides an investment opportunity to the firm which may result in an increase in market price.
So, a dividend is directly beneficial to the investor whereas retaining the cash might be indirectly
beneficial to the investors. A dividend policy must be set which is beneficiary to both the
investor and the firm.

1.8.2 Forms of Dividend

Dividends are paid in cash but when the company is unable to pay cash dividend, they use
different forms of dividend payment for satisfying stockholders. Such forms of dividends are

10
stock dividend, scrip dividend, property dividend, bond dividend etc. Some of them are listed
below:

a) Stock dividend or bonus share:

When the board of directors decides to distribute a common stock to its existing shareholders, it
is the stock dividend. It increases the number of shares of the stockholders. Stock dividends are
paid in place of cash dividends as stock dividend requires an accounting entry transfer from the
retained earnings account to the common stocks and paid in capital accounts.
Scrip Dividend: A scrip dividend is a distribution of surplus t to the stockholders IN the form of
notes or promises to pay the amount of dividend at a certain time. The notes are called dividend
certificates or scrip. Sometimes companies need cash generated by business earnings to meet
business requirements or with-hold the payment of cash dividends because of a temporary
shortage of cash. In such circumstances the company may issue scrip dividend payable at future
dates.

b) Cash dividend:
Cash dividend is the most common. way of providing the dividend. The cash account and the
reserve account of a company will be reduced when the cash’ dividend is paid. when cash
dividends are paid it is directly beneficiary to the investor as it immediately increases the cash
flow of the investors.

1.8.3 Review of Previous Study

Baker and Powell (2012). surveyed on "Managers of Dividend Paying Firms Listed on
Indonesian Stock Exchange (IDX)," to learn their views about the factors influencing dividend
policy, dividend issues, and explanation for paying dividends.
Devkota (2013). conducted research on “Dividend Policy of Commercial Bank in Nepal,”. The
main objectives are to analyze the existing dividend practices of sample banks in terms of DPS.
DPR and DR. to find out the effect on MVPS due to DPS and EPS. to analyze the relationship of
dividend with EPS, NWPS, MVPS of commercial banks and to find out significance difference
between mean of DPS, DPR and DY of Everest Bank Limited.

11
Giri (2014). conducted research on "A Comparative Study of Dividend policy NABIL Bank Ltd,
Standard Chartered Bank Ltd and Investment Bank Ltd,”. The main objective studies are to
identify dividend policy bank of selected banks, to analyzes the relationship between financial
indicators such DPS, EPS, DPR, PE ratio, Liquidity ratio and profitability ratio on market value
per share
(MVPS), to explain if there is any uniformity among DPS, EPS and DPR on the 3 sample joint
venture banks and find out the impact of dividend on share price.
Bista (2016) conducted research on "Dividend Policy and Its Impact on Market Price of Stock,"
which had covered the period of FY 2007/08 to 2014/15. The main objectives of research are to
examine the prevailing dividend policy adopted by Himalayan Bank Limited, to analyze the
impact of dividend on market price per share, to analyze the relationship of financial indicators
such as EPS, DPS, PE ratio, Liquidity ratio, Profitability ratio and market price value per market
price, and to examine the uniformity. From the coefficient of variance, the market price value of
market price in the market is fluctuating in all Everest Bank Limited.
G.C. (2012). conducted "A study on Dividend Policy and Its impact on Share Price": (Analysis
of Selected "A" Class Listed Companies). The major objective of the study is to determine the
trend and practices of dividend payment by the Nepalese "A" class listed companies of Nepal
from fiscal year 2006/07 to 2010/011 including to examine the impact of dividend policy on
market price of stock of "A" class listed companies of Nepal, to explore the prevailing practices
and effort made in dividend policy among the companies and to identify the regularity and
uniformity of dividend paying financial institutions.

1.9 Limitation of Study

The study only concentrates on dividend policy, it does not cover several other aspects of the
commercial bank:

● The study is done on the basis of secondary data. Therefore, the study has inherent

limitations of the secondary data.

● The study is concerned only at the dividend policy of selected Himalayan Bank

Limited.

12
 ● It is based on the data provided by the financial institution so they might lack

appropriate data.

● The data of Himalayan Bank limited firms analyze with the use of limited tools and

techniques.

CHAPTER I RESULT AND ANALYSIS

2.1 Analysis of Data
Chapter two also known as a heart of research work. In this chapter researchers collect various
data as per the research objectives and prepare charts, tables and other information as per the
necessary. All the data and: findings are included in this chapter.

2.1.1 EPS of Himalayan Bank Limited

Earning per share is the portion of the company’s profit allocated to each outstanding share of
common stock. The profitability of a common stockholder’s investment can be measured in
many other ways. The income of per share is calculated by dividing the earning available to
common shareholders by the total number of common stock outstanding, thus,
¿
EPS = earning available ¿ common shareholders number of common shareholders outstanding

The higher earning indicates the better achievements in turn of profitability of the bank by
mobilizing their funds and vice versa. In other words, the Earning per share indicates the strength
and weakness of the bank. The Earning per share of Himalayan Bank Limited under study are
tabulated as follows:
Table 2.1 EPS of Himalayan Bank Limited mean
Year EPS

2018/19 32.09

2019/20 31.52

2020/21 27.13

13
 2021/22 28.06

2022/23 28.89

mean 29.538

c.v. 1.9405

s.d. 6.56

Source: Annual report of Himalayan Bank Limited FY 2018 to 2022/23.

Figure 2.1 EPS of Himalayan Bank Limited

EPS of Himalayan bank ltd.

33
32.09
32 31.52
31
30
28.89
29
28.06
28
27.13
27
26
25
24
2018/19 2019/20 2020/21 2021/22 2022/23

The table 2.1 and the figure 2.1 shows the EPS of HBL from the year 2018/ 19 to 2022/23. In the
table means respective have been presented. The HBL has the EPS range between Rs. 13.89 to
Rs.32.09. The average EPS is Rs. 29.538 during the period. In F/Y 2018/19 the EPS is Rs.32.09,
in 2019/20 is Rs.31.52, 2020/21 is 27.13, in 2021/22 is Rs.28.06, in 2022/23 is Rs.28.89.

2.1.2 Analysis of DPS of Himalayan Bank Limited

Dividends are the portion of the net profit investor received as a benefit by the shareholders as a
return on investment or cash. The whole amount of earning may or may not be distributed to
shareholders by a company. How much per share dividend is distributed to common shareholders
can be known from this ratio. The dividend distributed among the common shareholders on a per
share basis can be determined. by this rated formula for calculating this ratio is under:

14
 total dividend amount
DPS =
number of outstanding shares

Generally, the higher DPS creates a positive attitude of the shareholders towards the bank as
common stock. which consequently helps to increase the market value of the shares and it also
works as the indicator of better performance of the bank management. The dividend per share of
the banks under the study are as follows:

Table 2.2 DPS of Himalayan Bank Limited

Year DPS (Rs)

2018/19 15.79

2019/20 22

2020/21 20

2021/22 24.63

2022/23 22.25

Mean 20.934

S. D 2.961

C.V 14.14

Source: Annual report of Himalayan Bank Limited FY 2018 to 2022/23

Figure 2.2 DPS of Himalayan Bank Limited

15
 30

24.63
25
22 22.25
20
20
15.79
15

10

0
2018/19 2019/20 2020/21 2021/22 2022/23
The table 2.2 and the figure 2.2 shows the DPSDPS
of HBL from the year 2018/ 19 to 2022/23. In the
table means respective have been presented. The HBL has the DPS range between Rs. 15.79 to
Rs.24.63. The average DPS is Rs. 20.934 during the period. In F/Y 2018/19 the DPS is Rs.
15.79, in 2019/20 is Rs.22, 2020/21 is 20, in 2021/22 is Rs. 24.63, in 2022/23 is Rs. 22.25.
2.1.3 Analysis of DPR of Himalayan Bank Limited
The percentage amount of dividend paid to shareholders out of earning per share is known as
dividend payout ratio. The purpose of calculating this ratio is to know the portion of dividend
distributed out of total earnings. This ratio shows the relation between the returns belonging to
equity shareholders and the dividend paid to them. It is calculated as under:

DPS
DPR = EPS

The higher the dividend payout ratio, the lower will be the proportion of retained
earnings and vice versa. The DPR of the Himalayan Bank Limited under the study are tabulated
as follows:

Table 2.3 DPR of Himalayan Bank Limited

Year DPR (%)

2018/19 49.20

2019/20 69.79

16
 2020/21 73.71

2021/22 87.77

2022/23 77.01

Mean 71.46

S. D 12.40

C.V 17.352

Source: Annual report of Himalayan Bank Limited FY 2018 to 2022/23.

Figure 2.3 DPR of Himalayan Bank Limited

100
87.77
90
80 73.71 77.01
69.79
70
60
49.2
50
40
30
20
10
0
The table 2.3 and the 2018/19
figure 2.3 shows the DPR of2020/21
2019/20 HBL from the year 2018/192022/23
2021/22 to 2019/20. In the
table means respective have been presented. The
DPR HBL has the DPR range between 49.2% to

160.18%. The average DPR is 71.46% during the period. In F/Y 2018/19 the DPR is 49.2, in
2019/20 is 69.79%, 2020/21 is 73.71%, in 2021/22 is 87.77%, in 2022/23 is 77.01%.

2.1.4 Analysis of Market Price Per Share (MPS) of HBL

Market values of share are one of the variables, which are affected by the dividend per share and
earnings per share of the bank. So, the MPS is that value of stock, which can be obtained by a
firm from the market. If the EPS and DPS are high, the MPS will also be high. In this study,
MPS can be obtained from the capital market and it is the closing price of shares indicated in the
NEPSE Index. The MPS of the Himalayan Bank Limited under the study are tabulated as
follows:
Table 2.4 MPS of Himalayan Bank Limited
Year MPS(Rs)

17
 2018/19 551

2019/20 581

2020/21 567

2021/22 562

2022/23 578

Mean 567.8

S. D 10.90

C.V 1.919

Source: Annual report of Himalayan Bank Limited FY 2018 to 2022/23.

Figure 2.4 MPS of Himalayan Bank Limited

585 581
580 578
575
570 567
565 562
560
555 551
550
545
540
535
2018/19 2019/20 2020/21 2021/22 2022/23

mps

The table 2.4 and the figure 2.4 shows the MPS of HBL during the study period. Like the
previous table, MPS of the HBL has been presented in the top part. The MPS is the value of
stock, which can be obtained by a firm from the market. In this study, MPS can be obtained from
the capital market and it is the closing price of shares indicated: in the NEPSE Index. MPS is
Rs.551 in 2018/19, Rs.581in 2019/20. Rs.567 in 2020/21, Rs. 56 in 2021/22 and Rs. 578 in
2022/23 respectively.

18
2.1.5 Analysis of Dividend Yield (DY) of HBL
The dividend yield is an estimate of the dividend-only return of a stock investment. It defined the
relationship between dividend per share and market value per share. It is very useful for the
investors. So, dividend yield is the dividend received by the
investors as a percentage of market prices per share in the stock market. Thus,

Dividend per share

Dividend Yield Ratio = Market price per share

The Dividend Yield (DY) of the Himalayan Bank Limited under the study are tabulated as
follows:

Table 2.5
DY of Himalayan Bank Limited

Year dy

2018/19 2.87

2019/20 3.74

2020/21 3.40

2021/22 2.96

2022/23 3.65

Mean 3.324

S. D 0.3531

C.V 0.1062

Source: Annual report of Himalayan Bank Limited FY 2018 to 2022/23

Figure 2.5 DY of Himalayan Bank Limited

19
 4 3.74 3.65
3.5 3.4

2.87 2.96
3
2.5
2
1.5
1
0.5
0
2018/19 2019/20 2020/21 2021/22 2022/23

DY of Himalayan Bank Limited

The table 2.5 and the figure 2.5 shows the value of the Dividend yield of Himalayan Bank
Limited within the period of 2018/19 to 2022/23. It is very useful for the investors. So, the
dividend yield is the dividend received by the investor as a percentage of market price per share
in the stock market.

2.1.6 Analysis of P/E Ratio of Himalayan Bank Limited

Price earnings ratio is the ratio for valuing a company that measures its current share price
relative. Price Earnings Ratio reflects the price which is currently paid by the market for each
rupees of price which is currently reported earnings per share. The price earnings ratio could be
calculated by dividing the market price per share by
earning per share.

market price per share

P/E Ratio =
earning per share

Table 2.6 P/E of Himalayan Bank Limited

20
 Year P/E

2018/19 17.02

2019/20 19.57

2020/21 17.25

2021/22 16.39

2022/23 23.18

Mean 18.69

S. D 2.492

C.V 13.33

Source: Annual report of Himalayan Bank Limited FY 2018 to 2022/23

Figure 2.6 P/E of Himalayan Bank Limited

P/E ratio
4
3.74 3.65
3.5 3.4

2.87 2.96
3

2.5

1.5

0.5

0
2018/19 2019/20 2020/21 2021/22 2022/23

21
The table 2.6 and the figure 2.6 shows the P/E ratio of HBL from the fiscal year 2018/19 to
2022/23. The mean of P/E ratio is 18.69. Price Earnings Ratio from 2018/19 to 2022/23 is
17.02,19.57,17.25,16.39 and 23.18 times.

2.2 Major Findings

This section includes the key findings of the study obtained from the analysis of data. Conclusion
derives from the findings which are presented in the next chapter.

● Finded out the EPS of the HBL from year 2018/19 to 2022/23.

● The HBL has the EPS range between Rs. 13.89 to Rs.32.09.

● The average of DPR is 71.76 during the study period.

● The DPR of Himalayan Bank from fiscal year 2018/19 to 2022/23 is increasing and

decreasing the trend respectively.

● The purpose of calculating this ratio is to know the portion of dividend distributed out of

total earnings.

● The value of DY of HBL within the period of study 2018/19 to 2022/23 has 2.87% to

3.74%.

● The mean P/E ratio of HBL is 18.69.

22
 CHAPTER – III
SUMMARY AND CONCLUSION

3.1 Summary
In Nepal, commercial banks are flourishing day by day as our country has adopted liberal
economic policy. From all the struggle of the past commercial banks have reached the place
where they are now. Himalayan Bank Limited is also one of the commercial banks which is
heading towards the better tomorrow. Himalayan Bank Limited is a customer-oriented bank so
its main focus is to serve customers in the most possible way.
The dividend policy decision affects the operation and prosperity of the organization because it
has the power to influence other two decisions of the organization i.e., capital structure decision
and investment decision. The stockholders have a high desire and expectation that the market
price of the share will be higher than net worth and get a high percentage of dividend from
earning. So, distributing dividends to the shareholders is an effective way to achieve the trust of
investors and encourage them to invest in shares. Besides this dividend paying ability reflects the
financial position of the organization in the market. So, funds that could not be used due to the
lack of investment opportunities would be better as dividends. Since shareholders have
investment opportunities elsewhere. Dividend paying banks have been selected for the study, so
the references can be made about implications of dividend policy they have adopted in their
market price per share. Even if the market is governed by various factors, this study is made to
analyze one of the important facts i.e., dividend. The study only covers one commercial bank and
only for the last five fiscal years 2018/19 to 2022/23. The available secondary data have been
analyzed using various financial and statistical tools. So, the reliability of the conclusion of this
study is determined on the accuracy of secondary data. To make the study more reliable,

23
different types of analysis have been conducted to find out the appropriate relationship between
market price and other variables, which affects the dividend. The theoretical statement is to study
the impact of dividend on stock price; therefore, it is concluded that none of the sample firms
have adopted consistent dividend policy.
The main and foremost objective of the research is to know about the dividend policy followed
by Himalayan Bank Limited. This research has some limitations as well. This research has some
limitations as well. The main drawback of the research is the time period within which the
researcher has been conducted is not sufficient and also
it has included the data over five years, period.

3.2 Conclusion
After conducting a study on dividend policy of Himalayan Bank Limited it shows that the
dividends are mostly cash based with some portion of stock dividend or bonus shares. This
research helps us to know about trends followed by the bank and the dividend distributed in each
fiscal year. It also shows that the dividends have fluctuated in each year and the bank mainly
provides the cash dividend to its shareholders.
The legal rule regarding dividend should be clear for the smooth growth of the enterprises as
well as growth of the national economy. There is a lack of rules for finding companies to pay
dividends. Some of the companies are unable to pay dividends, some are suffering from less and
there is an effort to minimize loss rather than payment investors and bind these companies by
special rules. Certain specific rules and regulation should be made from SEBON as well from the
government side regarding the dividend. The legal rules and regulations must be in favor of
investors to exercise the dividend practice and to protect the shareholders right. Long term vision
should be made, companies should have long term vision regarding earning and dividend
payment. Also, companies should define their vision clearly considering their future plans.
expansion in business, future economy of the country etc. Various internal and external factors
should be considered while taking decisions. Based on major findings. This study concludes that
there is a higher dividend impact on the market value of the bank's shares in most of the banks.
In other words, dividend plays an important role in changing the market price of stock. Besides
this, the following conclusions made the market price per share is affected by the dividend
related financial variable i.e., DPS and DPR either positively or negatively changes are DPS

24
affected the market price per share differently in different banks. In case of some banks. There
exists a positive relation between dividend and MPS while for others there exist negative relation
besides the MPS. Largely depends upon the dividend which has been shown by the coefficient of
multiple determination. Besides dividend other factors also affected the market price per share
i.e., EPS, DY, P/E ratio etc. Their effect is also different for different banks.
Thus it can be conducted that the dividend policy of the bank is not stable. There is no strategy of
calculating growth in the dividends paid by banks. This shows that the dividend policy of HBL is
not uniform and consistent. There is fluctuation in the dividend payment even if the bank is
making profit regularly the dividend payout ratio also does not show any stability and
coordination with other variables. There is a large fluctuation in dividends each year. There is
not a certain criterion for paying dividends. This study concludes that there is no long-term
vision regarding the dividend policy.

25
BIBLIOGRAPHY

Bista, G. (2016) "Dividend Policy and Its Impact on Market Price of Stock,” The Journal of
Finance, Vol.2 (I): 131143
Brigham, E.F. and Houston, J.F. (2004). Fundamental of Financial Management.
Chandra, P. (Ed). (2008). Financial Management. New Delhi: Tata Mc Grew Hill Publishing
Company Limited.
Fundamentals of Corporate Finance, Asmita Books Publisher and Distributors Ltd.
Gautam, R.R. and Thapa K. (2006). Capital Structure Management, Kathmandu: ° Asmita
Books Publishers Distributors Pvt. Ltd.
Joshi, P.R. (Ed). (2007). Research Methodology. Kathmandu: Buddha Academics Publisher and
Distributor Pvt. Ltd.
Pandey, I. M. (Ed). (2000). Financial Management. New Delhi: Vikas Publishing House P. Ltd
Paudel. R.B. K. Baral. Gautam. R. Rana, S. (2011). Corporate Finance Management,
Kathmandu: Asmita Publication Pvt. Ltd.
Singapore: Thomson South Western
Devkota. R. (2013) “Dividend Policy of Commercial Bank in Nepal," SEBON Journal.
Kathmandu: SEBON. vol. (iii).
Girl, K. (2014) "A Comparative Study of Dividend policy of NABIL Bank Ltd and Standard
Charter Bank Ltd.". New Business Age, Kathmandu: New Business Age Pvt. Ltd.
Paudel, M. (2015)"A Comparative Study of Dividend policy of Nepal Investment Bank Ltd.". A
case of Nepal, Journals of Finance, vol.(ii)
Rajbhandari, S. (2017) "Dividend Policy Comparative Study between Banks and Insurance
Companies," The Banker Magazine, Vol. 6 (IV), 197-223.

Websites

26
www.himalayanbank.com
www.HBL.com
www.nrb.org.com
APPENDICES I
a) Mean
An average is a single value selected from a group of values to represent them in the same way.
which is supposed to stand for the whole group of which it is a pair, as typical of all the values in
the group. It is the most commonly used and readily understood measure of central tendency.
Mathematically: Arithmetic Mean (AM) is given by,
∑X
x̄ =
n
Where,
x̄ = Arithmetic mean
X = Sum of all the values of variable X
n = Number of observations
b) Standard Deviation
Standard deviation (SD) represented by the Greek letter sigma(σ) is a measure that is used to
quantify the amount of variation or dispersion of a set data value. A low standard deviation
indicates that the data points tend to be close to the mean (also called the expected value) of the
set, while high standard deviation indicates that the data points are spread out over a wider range
of values. The standard deviation (σ) measures the absolute dispersion.
Mathematically,

σ=

c) Coefficient of variance
The standard deviation is absolute measures of dispersion; whereas the coefficient of variation
(CV) is a relative measure. To compare the variability between two or more series, CV is a more
appropriate statistical tool.
Mathematically,

27
CV

APPENDICES II
Table 2.1
EPS of Himalayan Bank Limited mean

Year EPS

2018/19 32.09

2019/20 31.52

2020/21 27.13

2021/22 28.06

2022/23 28.89

MEAN 29.538

S. D 1.9405

C.V 6.56

Source: Annual report of Himalayan Bank Limited FY 2018 to 2022/23.

APPENDICES III
Table 2.2
DPS of Himalayan Bank Limited

Year DPS(Rs)

2018/19 15.79

2019/20 22

2020/21 20

2021/22 24.63

2022/23 22.25

28
 MEAN 20.934

S. D 2.961

C.V 14.14

Source: Annual report of Himalayan Bank Limited FY 2018 to 2022/23

APPENDICES IV
Table 2.3
DPR of Himalayan Bank Limited

Year DPR (%)

2018/19 49.20

2019/20 69.79

2020/21 73.71

2021/22 87.77

2022/23 77.01

MEAN 71.46

S. D 12.40

C.V 17.352

Source: Annual report of Himalayan Bank Limited FY 2018 to 2022/23

APPENDICES V
Table 2.4
MPS of Himalayan Bank Limited

29
 Year MPS

2018/19 551

2019/20 581

2020/21 567

2021/22 562

2022/23 578

MEAN 567.8

S. D 10.90

C.V 1.919

Source: Annual report of Himalayan Bank Limited FY 2018 to 2022/23

APPENDICES VI
Table 2.5
DY of Himalayan Bank Limited

Year dy

2018/19 2.87

2019/20 3.74

2020/21 3.40

2021/22 2.96

2022/23 3.65

MEAN 3.324

S. D 0.3531

C.V 0.1062

30
Source: Annual report of Himalayan Bank Limited FY 2018 to 2022/23

APPENDICES VII
Table 2.6
P/E of Himalayan Bank Limited

Year P/E

2018/19 17.02

2019/20 19.57

2020/21 17.25

2021/22 16.39

2022/23 23.18

MEAN 18.69

S. D 2.492

C.V 13.33

Source: Annual report of Himalayan Bank Limited FY 2018 to 2022/23

31