A company announces a 10% dividend and your brain hears a 10% return. On NEPSE, those are two different numbers — and the gap between them is where most first-time investors get quietly disappointed.
The declared percentage always sits on the Rs 100 face value of an ordinary share — never on the price you paid. A 10% cash dividend is Rs 10 per share, whether you bought that share at Rs 250 or Rs 2,500. The percentage describes the payout per unit of face value; it says nothing about your investment.
Your real return has a name: the dividend yield — dividend per share divided by your buy price. Take two investors, the same company, the same 10% announcement. Investor A bought at Rs 500: Rs 10 ÷ Rs 500 = a 2.0% yield. Investor B bought at Rs 250: Rs 10 ÷ Rs 250 = a 4.0% yield. Same dividend, double the return — because yield is a function of your price, not the company's generosity.
Then tax takes its cut before the money reaches you. Nepal withholds 5% at source on cash dividends — the final tax for resident individuals under Section 88 of the Income Tax Act 2058. On a Rs 10 declared dividend, Rs 9.50 lands in your account, so the net yields in our example are really 1.9% and 3.8%.
Bonus shares play the same face-value game. A “10% bonus” sounds like a 10% gift, but it is 10 extra shares per 100 held — and the market price adjusts down the same morning, so your wealth does not move. The percentage describes the share count, not free money. The practical rule is simple: never ask just “what % dividend?” — ask “what % of what I paid?” Divide the per-share dividend by your own cost, subtract the tax, and only then decide whether an announcement is actually generous. Investors who count their trading costs and their taxes first see the full picture — the headline never tells it alone.
Frequently asked questions
What is dividend yield?
Dividend yield is the annual dividend per share divided by the share's market price (or your buy price). It tells you the cash return on YOUR investment — unlike the declared dividend percentage, which is always calculated on the Rs 100 face value.
Why is the dividend percentage calculated on face value?
It is the market convention: the percentage applies to the share's Rs 100 paid-up (face) value. A 10% cash dividend therefore always means Rs 10 per share, no matter what price you paid for the share.
How is dividend taxed in Nepal?
Nepal withholds 5% tax at source on cash dividends — the final tax for resident individuals under Section 88 of the Income Tax Act 2058. On a Rs 10 declared dividend, Rs 9.50 reaches your account.
Is a higher dividend percentage always better?
Not necessarily. A 10% dividend on a share you bought at Rs 500 is only a 2% yield, while the same 10% on a Rs 250 buy is a 4% yield. The declared percentage describes the payout per share; your yield depends on your price — and then tax takes its cut.
Does the same face-value logic apply to bonus shares?
Yes. A 10% bonus means 10 extra shares per 100 held — the percentage describes the share count, not a cash gift. The market price adjusts down the same morning, so the headline percentage is not free money.
This article is published for research and education purposes only. It is not investment advice, and nothing here should be read as a recommendation to buy, sell, or hold any security. Figures used are illustrative examples for teaching.