Unclaimed dividends of companies pile up

KATHMANDU, JAN 24: 

Despite dividends being a pivotal factor in stock price movements, the amount of unclaimed dividends has piled up with companies. 

The amount not claimed by investors is almost 16 per cent of the total amount set aside by banks for dividend distribution.

Among the 28 listed commercial banks, 22 announce regular dividends and the amount of unclaimed dividends stand at Rs 478 million. Commercial banks have so far set aside Rs 2.9 billion for dividend payments in their balance sheets. 

Development banks and finance companies have set aside Rs 101 million and Rs 232 million, respectively. 

The expectation of lucrative dividends is the major propeller of the stock price. Every year, share prices fluctuate around September to December based on dividend expectations. Most of the listed companies announce dividends based on their performance in the previous fiscal year. The dividend announcement continues until mid-January when most of the annual general meetings take place that approve the dividend proposal. 

If investors are expecting lucrative dividends, the stock price surges before the book closure. On the other hand, share prices go down if companies fail to announce attractive dividends. 

However, such a large amount of unclaimed dividends solely belonging to banks shows that there are still a large number of investors who are either unaware or not interested in the annual returns provided by their stocks. 

The amount only refers to cash dividend and there is an equal amount of stock dividend, that is, bonus shares that have not been claimed by investors. Companies announce the dates of dividend distribution by publishing a notice in national newspapers. 

“A large number of investors who do not come to get their dividends are those who are not in Nepal,” said Bhishma Raj Chalise, CEO of Civil Capital — a merchant bank that also undertakes share registry for listed companies. 

According to him, there are investors who come and claim the dividend after years when they are in Nepal. And those who have not bothered to collect dividends approach the companies only when the financial institutions publish a notice asking them to come and get the unclaimed dividends. 

“There are a few investors who have not approached companies for nearly half a decade to reclaim the money that is refunded when one is not allotted shares during an IPO,” he added. 

Earlier, capital market regulator — Securities Board of Nepal (Sebon) — and Company Registrar’s Office were preparing to establish Investor Protection Fund (IPF) from the dividends that have not been claimed for more than five years. 

“This fund is supposed to provide monetary compensation to investors in case they lose money due to some technical failure of the stock exchange or if a trading member defaults on payment and to enhance awareness among investors among others,” said director of Sebon Niraj Giri. However, things have not progressed as planned, he added.

Source: THT