The listed mutual funds announced very poor dividends in 2019, the lowest in four years, as a sudden Bangladesh Securities and Exchange Commission’s ban on bonus dividend declaration by the MFs shocked the asset managers.
Of the 29 listed MFs which maintain the July-June accounting year, 25 declared lower dividends, one announced higher dividend and three declared dividends at the same rates they had given in the previous year.
There are 37 mutual funds listed on the country’s stock market. But seven of them maintain different accounting year and CAPM IBBL Islamic Mutual Fund, which was enlisted on the stock exchange in 2018, declared 8 per cent cash dividend.
Regulator Bangladesh Securities and Exchange Commission on July 16 barred asset management companies (AMCs) from declaring bonus dividend for the mutual funds’ unit holders that impacted on the dividend declarations, market experts said.
Most AMCs used to declare stock dividends, hurting the interest of the unit holders for years.
Market experts said declaring bonus dividend by MFs was nothing but deceiving unit holders as unit prices of most of the mutual funds were far below their face value.
The mutual funds failed to attract investors as they continuously declared bonus dividends, they said.
Therefore, the BSEC made the firm decision and put a ban on stock dividend declarations by MFs.
The mutual funds managed by RACE Asset Management Company announced lowest dividends compared with other AMCs in the market.
The asset management company declared 3 per cent cash dividends for eight mutual funds and 3.5 per cent cash dividends for two mutual funds. The rates were the lowest in four years.
The only mutual fund that declared higher dividend was SEML IBBL Shariah Fund as it fared 5 per cent cash dividend in 2019 against 4 per cent cash dividend in the previous year.
Only two MFs — NLI 1st Mutual Fund (13 per cent) and Southeast Bank 1st Mutual Fund (12 per cent) — declared dividends more than 10 per cent while ‘Reliance One’ The 1st Scheme of Reliance Insurance Mutual Fund declared 10 per cent cash dividend.
Of the 29 MFS, 17 funds announced below 5 per cent or 5 per cent dividends for the year 2019.
The MFs’ dividend giving situation was worse in last four years that dented the confidence of unit holders of the mutual funds, market experts said.
They said the volatility at the market from the very beginning of the year also affected the profit-making ability of the funds.
After the BSEC made the decision that the MFs would not be allowed to declare stock dividend, investors started investing in mutual funds, but poor dividend declarations prompted the investors to make an exit from the sector, they said.
The share prices of mutual fund sector plummeted by 25 per cent in last 10 sessions.
Due to the disappointing performance of the mutual funds, 27 mutual funds were trading far below their issue prices, reflecting investors’ lack of interest for the MFs, a stockbroker said.
The 10 mutual funds under RACE announced poor dividends.
First Janata Bank Mutual Fund, EBL First Mutual Fund, AB Bank 1st Mutual Fund, PHP First Mutual Fund, Popular Life First Mutual Fund, IFIC Bank 1st Mutual Fund, EBL NRB Mutual Fund and First Bangladesh Fixed Income Fund declared 3 per cent cash dividends while Trust Bank 1st Mutual Fund and EXIM Bank 1st Mutual Fund declared 3.5 per cent cash dividends.
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