Dividend Season Debate: Cash or Bonus Shares? — Analyst Ajit Khanal Shares Practical Insights

Kathmandu — As Nepal’s stock market enters dividend season, the debate over “Cash Dividend vs. Bonus Shares” is heating up. Market analyst Ajit Khanal, through a recent Facebook post, has offered practical insights on how investors should decide between the two.

According to Khanal, this issue should be viewed from two perspectives — first, the company’s need for growth, expansion, or capital; and second, the potential profit or loss for investors.

Cash Dividend for Cheap Stocks, Bonus Shares for Expensive Ones

Khanal explains that if a company’s market price is relatively high, cash dividends may not be beneficial to investors. This is because companies distribute cash dividends based on the face value of shares (typically Rs. 100), not the current market price.

However, in such cases, bonus shares could be more beneficial. "When a company with a high market price issues bonus shares, the market-adjusted value of those shares remains high — making them profitable for shareholders," he stated.

Momentum Often Follows Bonus Share Issuance

He also highlighted that in many cases, share prices show positive momentum even after price adjustment post-bonus distribution. Especially in bullish markets, bonus shares tend to perform well and attract investor interest.

Khanal recommends that investors consider opting for cash dividends in fundamentally cheap stocks, and bonus shares in relatively expensive ones.

His analysis encourages investors to make decisions based not on emotions, but on company valuation, dividend type, and overall market conditions.

Khanal ended his post with a cheerful “Happy Rojgar Day” greeting to mark the occasion.