In case of bonus shares, the company’s price gets adjusted but does the same happens if a company gives cash dividend only?

More at: r/NepalStock by MaxProUltraLegend

  1. The market price will be adjusted only if the proposed cash dividend exceeds 10% of the market price on the day before adjustment (which is highly unlikely in NEPSE)

    For eg: Let’s take UNL and assume
    LTP before adjustment/bookclose = 20000
    Proposed Cash Dividend = 650 per share

    So, in this case, there will be no adjustment in price.
    In order for price to adjust, UNL must propose at least 2000 per share cash dividend i.e. 10% of LTP.

    A Company like NIFRA trading around 350s should propose cash dividend greater than 35 per share.

    Hence, adjustment for equity shares is very unlikely whereas it happens regularly for the mutual funds. If the criteria is fulfilled then the adjustment will happen as same as adjustment for bonus shares.

  2. Out of context but : if company says it will give 50% dividend, on what amount is it giving 50 percent dividend ?

  3. The price will be adjusted if cash dividend is more than 10% of LTP, i.e if certain Mutual fund have LTP 15 rupees then their price won’t be adjusted as long as it’s bonus is less than 10% of 15 = 1.5 Rs. Per stock i.e = 1.5/10 * 100% = 15% .

    Mutual fund le bahek arule adjust garna pardaina cuz their Ltp is very high and cash dividend tetro hudaina.

  4. Technically nothing should happen to the share price
    But if the cash dividend is way below expectations, then the share price could get affected

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