Stock market is quiet, dividends "stimulate" stocks
Yesterday (August 23), the stock market closed slightly up when the VN-Index increased by 0.2% to 1,285.32 points and the HNX-Index added 0.67% to 240.07 points. However, the number of stocks (CP) decreasing in price was greater and market liquidity was also low. On the HOSE floor, more than 16,839 billion VND was traded while on the HNX floor, it reached more than 1,320 billion VND. In general, both the VN-Index and the capitalization of the HOSE floor are at the same level as more than 3 months ago. In particular, the trading value continuously decreased and even in many sessions in July, the trading value on the HOSE floor fell to below 10,000 billion VND - the lowest since the end of 2023, making many individual investors discouraged.
Many individual investors do not care about dividends when buying stocks.
However, there are still stocks that are of interest when there is information about high dividends. For example, Vietnam Gas Corporation (stock code GAS) will close the list of shareholders to pay 2023 cash dividends at a rate of 60% on September 16, equivalent to each share receiving 6,000 VND. With nearly 2.3 billion shares in circulation, the total amount the company plans to spend is 13,780 billion VND. At the same time, GAS shareholders this time will also receive shares issued by the company to increase capital at a ratio of 50:1, equivalent to shareholders owning 50 shares will receive 1 more share. Over the past month, the price of this stock has increased by 10%, despite many bluechips on the HOSE going backwards.
Associate Professor, Dr. Nguyen Huu Huan, University of Economics, Ho Chi Minh City
Not only GAS, many businesses also pay dividends at a higher rate, over 100% (equivalent to more than 10,000 VND/share). For example, Vietnam Electric Cable Joint Stock Company (stock code CAV) paid dividends at a rate of 100% last year and this cash dividend rate was also paid in 2022. Currently, CAV's stock price is 69,900 VND. If the dividend is maintained at 100% (equivalent to 10,000 VND/share), the dividend/stock price ratio is equivalent to 14.5%, far exceeding the savings interest rate. Or another enterprise, Binh Minh Plastics Joint Stock Company (stock code BMP), has maintained a dividend payout ratio of over 100% for 4 consecutive years from 2020 to 2023 and forecasts that the high dividend payout ratio will continue until 2025. Based on the current price of BMP shares of VND 105,200, the dividend/share price ratio is equivalent to 9.5%, higher than the savings interest rate. Meanwhile, Son La Sugarcane Joint Stock Company (stock code SLS) also pays cash dividends in 2023 at a rate of up to 150%, equivalent to VND 15,000/share. But compared to the current share price of VND 195,500, the dividend/share price ratio is only about 7.6%...
Only institutional investors care about dividends
Although the dividend payments of many listed companies also have a positive impact on stock prices in a few sessions, especially for those with high dividend rates. However, for many individual investors, this is not an important factor for them to decide to buy and hold stocks. According to current regulations, stock prices will be adjusted accordingly. For example, CAV is currently priced at VND69,900. If a 100% cash dividend is paid (equivalent to VND10,000/share), on the ex-rights trading day, the stock price will only be VND59,900. For many investors, they can choose to buy stocks on the ex-rights trading day at a lower price instead of buying earlier because they have to wait a while for the dividend to be paid by the company. Because there are many stocks whose prices are adjusted according to regulations, they will immediately increase back to the level before receiving dividends. At that time, investors who hold early will receive the full dividend amount.
Mr. Phan Dung Khanh, Investment Consulting Director of Maybank Investment Bank, said that most individual investors in Vietnam do not care about dividends. Investors have a short-term trading mentality and do not want to hold stocks for a long time, so they only focus on assessing whether the stock is likely to increase in price or not? How much will it increase in the next few weeks... This leads to a situation where even many businesses are losing money and do not pay dividends, but are still bought by many investors, helping to increase stock prices. On the contrary, many businesses pay dividends regularly every year, but their stock prices hardly increase, or sometimes even decrease.
On the contrary, dividends are a factor that institutional investors and investment funds are interested in along with many other information to choose stocks to buy. Therefore, in the annual financial reports of institutional investors and investment funds, there is a financial income item, which includes dividends from investments during the year. However, businesses paying dividends that are too high is not something that is encouraged by institutional investors. Whether or not a business leaves cash flow to serve the development and expansion of business operations will be important for institutional investors to evaluate in their long-term stock holding plans.
Associate Professor, Dr. Nguyen Huu Huan, University of Economics, Ho Chi Minh City, also agrees with the opinion that many domestic individual investors are not interested in dividends of listed companies. Partly because most companies also pay dividends at low levels, from 10 - 20% (equivalent to 1,000 - 2,000 VND/share). Particularly for stocks with high prices from 40,000 - 50,000 VND or more, this dividend level is too low compared to the amount of money spent to buy the shares. Only a few businesses have "super dividends", often focusing on large shareholder groups or small businesses, shareholders are mainly employees of the company... In addition, most of the time, individual investors still only like to "surf", buy and sell short-term to make a profit from the difference in stock prices.
"Large investors and investment funds themselves are more interested in dividends than individual investors. However, organizations and investment funds usually pay more attention to earnings per share (EPS) instead of how much dividend is distributed. A company's EPS is high but dividends are low, investment funds and organizations can still appreciate it because the business will retain money to invest in expansion and in the future also increase the value of the company. Meanwhile, if the company distributes all profits to shareholders, it shows that there is no plan to use cash flow, no direction for company development, which is not necessarily good for the long term," Associate Professor, Dr. Nguyen Huu Huan shared.
Dividend higher than stock price
Most large-scale companies in the past have had low dividend rates, commonly from 10 - 30%. Particularly for companies with high dividend rates, the sudden increase falls on small-scale units, with a small number of shares traded. For example, Phan Thiet Garment Export Joint Stock Company (stock code PTG) has provisionally paid the first dividend in 2024 in cash at a rate of 50%, equivalent to 1 share receiving 5,000 VND. Notably, the dividend that PTG paid to shareholders was 10 times the share price traded on UPCoM at the time the company paid dividends (price 500 VND/share). Or Joint Stock Company 397 (stock code BCB) also paid 2023 cash dividends at a rate of 29.19%/share (1 share received 2,919 VND). This dividend is 4 times higher than the current stock price of 700 VND...
Source: https://thanhnien.vn/chung-khoan-lanh-co-tuc-co-lam-am-long-nha-dau-tu-185240823154645847.htm
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