DIVIDEND POLICY OF HIMALAYAN BANK LIMITED.

(HBL)

A Project Work Report

Submitted by:

DIWAKAR ALE MAGAR

T.U. Reg. No:

Exam Roll. No.:

Group: Finance

A Report Submitted to:

The Faculty of Management

Tribhuvan University ( T.U.)

Kathmandu, Nepal

IN PARTIAL FULFILLMENT OF THE REQUIREMENT FOR THE

BACHELOR OF BUSINESS STUDIES (BBS)

Lalitpur, Nepal

2024
 DECLARATION
I hereby declared that the project work entitled “Dividend Policy of Himalayan Bank Limited.”submitted
to the Faculty of Management, Tribhuvan University, is my original work done in the form of partial
fulfillment of the requirement for the degree of Bachelor of Business Studies (BBS) under the
supervision of Mr. Nirmal Tiwari , Faculty member, Pinnacle College, Lagankhel, Lalitpur. This project
work report has not been submitted to any other university or institution for the award of any degree or
diploma.

................................................

Diwakar Ale Magar

Date:2024
 ACKNOWLEDGEMENT

This report has been prepared of the partial fulfillment of the requirement of the degree of
Bachelor of the 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 dep respect to my Mr. Nirmal Tiwari,
faculty member 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 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.
 TABLE OF CONTENTS
Title page i
Declaration ii
Supervisor’s Recommendation iii
Endorsement iv
Acknowledgement v
Table of contents vi
List of tables vii
List of Figures viii
Abbreviations ix

CHAPTER 1: 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 4-5
1.6 Literature review 5
1.6.1 Conceptual Framework 5
1.6.2 Forms of Dividend 6-7
1.6.3 Review of Previous Study 7-8
1.7 Research methods 9
1.7.1 Research Design 9
1.7.2 Population sample 9
1.7.3 Type of Data 9-10
1.7.4 Data Collection Procedure 10
1.7.5 Technique of Analysis 10-13
1.8 Research Gap 13
1.9 Limitation of study 13

CHAPTER II: RESULT AND ANALYSIS……………………………………………………………14

2.1 Analysis of data 14-21
2.2 Major Findings 22

CHAPTER III: SUMMARY AND CONCLUSION………………………………………………..23

3.1 Summary 23-24
3.2 Conclusion 24-25

BIBLIOGRAPHY
APPENDICES
LIST OF TABLES

Table No. 2.1 EPS of Himalayan Bank Limited

Table No. 2.2 DPS of Himalayan Bank Limited
Table No. 2.3 DRP of Himalayan Bank Limited
Table No. 2.4 MPS of Himalayan Bank Limited
Table No. 2.5 DY of Himalayan Bank Limited
Table No. 2.6 P/E Ratio of Himalayan Bank Limited
 List of Figures

Figure No. 2.1 EPS of Himalayan Bank Limited

Figure No. 2.2 DPS of Himalayan Bank Limited
Figure No. 2.3 DRP of Himalayan Bank Limited
Figure No. 2.4 MPS of Himalayan Bank Limited
Figure No. 2.5 DY of Himalayan Bank Limited
Figure No. 2.6 P/E Ratio of Himalayan Bank Limited
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
T.U Tribhuvan University
S.D. Standard Deviation
C.V. Coefficent of Variation
CHAPTER- I
INTRODUCTION
1.1 Background of the Study
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. Financial institution in 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.
Bank is a financial institution, which primarily deals in borrowing and leading. Banking is a vital
part of the national economy and vehicle for the mobilization of the economy’s financial
resources and extension of credit to the business and service enterprises. Loans and advances
are the income generating items in bank’s balance sheets. This should be given with carein the
right time to the right customer. Banks should indulge schemes regarding loans with greater
facilities to the borrowers. The bank should indulge good policies regarding repayment of loan.
Such that it is not acquainted to loss due to fraud. It should adopt all the new facilities possible
so that can provide efficient and prompt service reducing its operating expenses. Proper
planning of investment should be done to increase income. According to Crowther, " The
banker’s business is to take the debts of other people to offer his own in exchange, and thereby
create money." Chamber’s Twentieth Century Dictionary defines a bank as an "institution for
keeping lending and exchanging, etc. of money."
According to Kent,"A bank is an organization whose principal operations are concerned with the
accumulation of the temporarily idle money of the general public for the purpose of advancing
others for expenditure."
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 dividend, and wht
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, which is
the maximization of shareholder’s wealth. This study investigated the effect of dividend policy
on the value of the firm. It is 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. Data obtained
were analyzed regression analysis with the aid of Statistical Package for Social Science(SPSS).
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 ratio not to 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, semi-annually and 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 seems to 40% in
Nepal. Dividend policy is the policy which concerns the quantum of profits to be distributed by
the ways 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 the most of the companies.
They simply consider each dividend decision in an independent manner. This is primarily due to
the fact that the finance 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: Loan 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 following the lead by introducing similar products and services.
Therefore,the bank stands for the innovations in the 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 the 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 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 earning of the companies.
The main focus of the study is to deal with the following problems:
1. Is DPS proportionate to the firm’s EPS?
2. What is the impact i=of dividend policy on market price of stock?
3. Is there any consistency in EPS,DPS and DPR of the HBL?
1.4 Objective of the Study
The main 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.
1. To examine the dividend policy of Himalayan Bank Limited.
2. To determine the prevailing policies and practices regarding dividend in the Nepalese
firms with reference of the Himalayan Bank Limited.
3. To identify if there is any uniformity in DPS,EPS,MPS and DPR of the Himalayan Bnak
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 is 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
takeholders. 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 Literature Review
Review of Literature is a summary and analysis of knowledge about a particular topic or area of
inquiry. It is a 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.
1.6.1 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. 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 whereas
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 the both the investor and the firm.
1.6.2 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
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 shareholders.
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 to the shareholders 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 temporary shortage of cash. In such circumstances the company may scrip
dividend payable at future dates.
b) Bond dividend:
If dividends are paid in the form of a bond, promising that it will mature in the future is
known as bond dividend. Bonds used to pay carry interest and it means that the company
assumes the fixed obligation of interest payment annually and principal amount of bond at
maturity date.
c) Stock Split and Reserve Split:
A method that is commonly used to lower the market price of the firm by increasing the
number of shares belonging to each shareholder is the stock split. The effect of stock split is
an increasing number of shares outstanding and reduction in the par, or stated, value of
share. The total network of the firm remains unchanged. A method that is used to raise the
market cash flow to the investor but by the retaining the fund it provides an investment
opportunity to the firms 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.
d) Stock repurchases:
It is the process of repurchasing bank outstanding share of any company. A corporation
repurchase of its stock can serve as a tax advantages substitute for dividend payout.
Repurchases have the effect of raising share prices so that shareholders can be taxed at the
capital gain rate instead of ordinary dividend rate on cash dividend.
e) 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 investors as it immediately increases the
cash flow of the investors.
 1.6.3 Review of Previous Study
Baker and Powellv (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 objective are to analyzethe 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.
Giri (2014). Conducted research on "A Comparative Study of Dividend Policy on NABIL Bank
Ltd.,Standard Chartered Bank Ltd and Investment Bank Ltd". The main objectives studies are
to identify dividend policy bank of the selected banks, to analyzes the relationship between
financial indicators such DPS,EPS,DPR,PE ratio. Liquidity ratio and profitability ratio on
market market value per share.
Poudel(2015). Conducted research on "A Comparative Study of Dividend Policy of Nepal
Investment Bank Ltd.," that covered the period of F/Y 2009/10 to 2011/14. The main
objectives are to see the comparative dividend practice selected of banks, to see out the
type of the dividend policy followed by the selected banks, to see out the relationship DPS
with the various important variables such as EPS and stock price and relationship stock price
with price earnings ratio and dividend yield ratio and to provide suggestion and possible
guidelines to overcome various problems on the basis of finding.
Rajbhandari (2017). Has conducted a research topic on "Dividend Policy Comparative Study
between Banks and Insurance Companies," the main objectives examine the relationship
between the market price of the stock to identify the appropriate dividend policy followed
by the banks and insurance companies and to analyze the relationship between dividend
policy decision of banks and insurance companies. The major findings where average
earning per share seems satisfactory of all sample companies. The positive relationship
between dividend per share and earning per share. The relationship between market price
per share and dividend is positive.
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
1st 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.
1.7.1 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 shareholders. In other words,
the study is closely related to the impact of dividend on market price of common stock and
wealth position of shareholders. Therefore, the descriptive as well as analytical approach design
are adopted here to make the analysis more effective, financial tools, statistical tools and
testing models are also used.
1.7.2 population sample
There are 28 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 28 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.
1.7.3 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 sheet, 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-
a. annual report published by Himalayan Bank Limited
b. Data are collected for the year …………………………………..as five-year data are analyzed.
c. Nepal Stock Exchange, website (www.nepal.stock.com) and perspective firm’s
d. Official websites
1.7.4 Data Collection Procedure
The data analysis tools are applied as simply as possible. Data are obtained from the various
sources cannot directly be used in their original form. They need further verified and simplified
for the purpose of analysis. Data, information figures and facts so obtained need to be checked,
rechecked, edited and tabulated for the 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.
1.7.5 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 the every share they owned is known
as EPS. The income of per share is calculated by dividing the earning available to
common shareholders by the total number of common stock outstanding. Thus,
earning available ¿ common shareholders ¿
EPS= number of common stock outstanding ¿
¿
b) Dividend Per Share (DPS)
Dividends are the portion of the net profit investor received as a benefit by the
shareholders as a return on investment or cash. Amounts of net profit after tax are available
to the shareholders which is received by the shareholders divided by the number of shares
outstanding is known as dividend per share. They are calculated by:
Total dividend amt
DPS=
no . of outstanding shares
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
earnings. This ratio shows the relation between the returns belonging to equity
shareholders and dividend paid to them. It can be calculated as under:
Dividend per share
DPR=
Earning 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 is 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 per share
Dividend Yield Ratio=
market price per share
e) Price Earnings ratio (P/E)
Price earnings 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,
Market Price per share
P/E Ratio=
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 pair, as typical
of all the values in the group. It is the most commonly used and readily understood
measure of central tendency. Arithmetic mean of given set of observations is their sum
dividend by the number of observations.
Mathematically, Arithmetic Mean (AM) is given by:

X=
∑x
n
Where,
X= 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,

√ ∑ 2
σ= (X − X )

N
c. Coefficient of variance
 Although the standard deviation of analytical data may not vary much over limited
range of such data is usually depends on the magnitude of such data. The standard
deviation is absolute measures of dispersion; whereas the coefficient of variation (C.V) is
a relative measure. To compare the variability between two or more series, C.V. is a
more appropriate statistical tool.
Mathematically,
σ
C>V= *100
x
1.7 Research Gap
Research gap 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 study of above cases therefore many lacks of and
unclear information in many cases. I request they should be given more samples while
conducting the research design.
1.8 Limitation of Study
The study only concentrates on dividend policy, it does not cover several other aspects of the
commercial bank:
1. The study is done on the basis of secondary data. Therefore, the study has inherent
limitations of the secondary data.
2. The study is concerned only at the dividend policy of selected Himalayan Bank Limited.
3. It is based on the data provided by the financial institution so they might lack
appropriate data.
4. The data of Himalayan Bank Limited firms analyze with the use of limited tools and
technology.
CHAPTER II
RESULT AND ANALYSIS
2.1 Analysis of Data
Chapter 2 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 stock 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 weaknesses 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 32.09
2021/22 27.06
2022/23 16.42
Mean 27.836
S.D.
CV
SOURCE:Annual report of Himalayan Bank Limited from FY 2018/19 to 2022/23.

Figure 2.1 EPS of Himalayan Bank Limited

The table 2.1 and the figure 2.1 shows the EPS of HBL from the year 2016/ 17 to
2020/21. In the table means respective have been presented. The HBL has the EPS
range between Rs. 23.11 to Rs.43.03. The average EPS is Rs. 32.98 during the period.
In F/Y 2016/17 the EPS is Rs. 43.03, in 2017/18 is Rs.35.15, 2018/19 is 23.11, in
2019/20 is Rs. 32.09, in 2020/21 is Rs. 31.52.

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:
DPS = Total dividend Amount
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)
2016/17 31.58
2017/18 26.32
2018/19 15.79
2019/20 22
2020/21 20
Mean 23.14
S. D 5.41
C.V 23.38
Source: Annual report of Himalayan Bank Limited FY 2016 to 2020/21

Figure 2.2 DPS of Himalayan Bank Limited

The table 2.2 and the figure 2.2 shows the DPS of HBL from the year 2016/ 17 to
2020/21. In the table means respective have been presented. The HBL has the DPS
range between Rs. 15.79 to Rs.31.58. The average DPS is Rs. 23.14 during the period.
In F/Y 2016/17 the DPS is Rs. 31.58, in 2017/18 is Rs.26.32, 2018/19 is 15.79, in
2019/20 is Rs. 22, in 2020/21 is Rs. 20.

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:
DPR = Dividend per share
Earnings per share

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 (%)
2016/17 73.39
2017/18 74.88
2018/19 68.33
2019/20 68.55
2020/21 63.45
Mean 69.72
S. D 4.06
C.V 5.82
Source: Annual report of Himalayan Bank Limited FY 2016 to 2020/21
Figure 2.3 DPR of Himalayan Bank Limited

The table 2.3 and the figure 2.3 shows the DPR of HBL from the year 2016/ 17 to
2020/21. In the table means respective have been presented. The HBL has the DPR
range between 63.45% to 74.88%. The average DPR is 69.72% during the period. In
F/Y 2016/17 the DPR is 73.39, in 2017/18 is 74.88%, 2018/19 is 68.33%, in 2019/20 is
68.55%, in 2020/21 is 63.45%.

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)
2016/17 1500
2017/18 886
2018/19 551
2019/20 581
2020/21 567
Mean 917
S. D 363.37
C.V 39.62
Source: Annual report of Himalayan Bank Limited FY 2016 to 2020/21
Figure 2.4 MPS of Himalayan Bank Limited

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.1500 in 2016/17, Rs.886 in 2017/18. Rs.551
in 2018/19, Rs. 581 in 2019/20 and Rs. 567 in 2020/ 21 respectively.

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 Yield Ratio = Dividend per share
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
2016/17 2.11
2017/18 2.97
2018/19 2.87
2019/20 3.74
2020/21 3.40
Mean 3.018
S. D 0.55
C.V 18.22
Source: Annual report of Himalayan Bank Limited FY 2016 to 2020/21
Figure 2.5 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 2016/17 to 2020/21. It is very useful for the
investors. So, the dividend yield is the dividend received by the investor as a
percentage ofmarket 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 Earning 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.
P/E Ratio = Market Price per share
Earning per share

Table 2.6
P/E of Himalayan Bank Limited
YEAR P/E
2016/17 34.86
2017/18 25.21
2018/19 23.84
2019/20 18.11
2020/21 17.98
Mean 24
S. D 6.17
C.V 25.70
Source: Annual report of Himalayan Bank Limited FY 2016 to 2020/21
Figure 2.6 P/E of Himalayan Bank Limited

The table 2.6 and the figure 2.6 shows the P/E ratio of HBL from the fiscal year
2016/17 to 2020/21. The mean of P/E ratio is 24. Price Earnings Ratio from 2016/17
to 2020/21 is 34.86, 25.11, 23.84, 18.11 and 17.98 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.
● Find out the EPS of the HBL from year 2016/17 to 2020/21.
● The HBL has the EPS range between Rs. 23.11 to Rs. 43.03.
● The average of DPR is 69.72 during the study period.
● The DPR of Himalayan Bank from fiscal year 2016/17 to 2020/21 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 2016/17 to 2020/21 has 2.11%
to 3.40%.
● The mean P/E ratio of HBL is 24.
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 six fiscal years 2015/16 to 2019/20. 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, 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 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 thedividend policy.
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
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,
x̄ = ∑ X
n
Where,
x̄ = Athematic mea
∑ 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,

CV
APPENDICES II
Table 2.1
EPS of Himalayan Bank Limited mean
YEAR EPS
2016/17 35.15
2017/18 23.11
2018/19 32.09
2019/20 31.52
2020/21 32.09
Mean 30.79
S. D 6.41
C.V 19.43
Source: Annual report of Himalayan Bank Limited FY 2016 to 2020/21

APPENDICES III
Table 2.2
DPS of Himalayan Bank Limited
YEAR DPS(RS)
2016/17 31.58
2017/18 26.32
2018/19 15.79
2019/20 22
2020/21 20
Mean 23.14
S. D 5.41
C.V 23.38
Source: Annual report of Himalayan Bank Limited FY 2016 to 2020/21
APPENDICES IV
Table 2.3
DPR of Himalayan Bank Limited
YEAR DPR (%)
2016/17 73.39
2017/18 74.88
2018/19 68.33
2019/20 68.55
2020/21 63.45
Mean 69.72
S. D 4.06
C.V 5.82
Source: Annual report of Himalayan Bank Limited FY 2016 to 2020/21

APPENDICES V
Table 2.4
MPS of Himalayan Bank Limited
YEAR MPS (RS)
2016/17 1500
2017/18 886
2018/19 551
2019/20 581
2020/21 567
Mean 917
S. D 363.37
C.V 39.62
Source: Annual report of Himalayan Bank Limited FY 2016 to 2020/21
APPENDICES VI
Table 2.5
DY of Himalayan Bank Limited
YEAR DY
2016/17 2.11
2017/18 2.97
2018/19 2.87
2019/20 3.74
2020/21 3.40
Mean 3.018
S. D 0.55
C.V 18.22
Source: Annual report of Himalayan Bank Limited FY 2016 to 2020/21

APPENDICES VII
Table 2.6
P/E of Himalayan Bank Limited
YEAR P/E
2016/17 34.86
2017/18 25.21
2018/19 23.84
2019/20 18.11
2020/21 17.98
Mean 24
S. D 6.17
C.V 25.70
Source: Annual report of Himalayan Bank Limited FY 2016 to 2020/21