High cash dividends lure investors, but hidden traps lurk behind big payouts

Nevertheless, substantial dividends do not equate to high investment returns, as investors still encounter the risks of declining stock prices and the potential inability of companies to sustain these payout levels.

Across the market, multiple businesses are distributing high cash dividends for the year 2025. FPT Online Services Joint Stock Company (FOC) is paying dividends at a rate of 100 percent, equivalent to VND 10,000 per share. Sai Gon Song Tien Beer Commercial Joint Stock Company (SST) plans to pay at a rate of 80.16 percent, equivalent to VND8,016 per share. Noi Bai Cargo Services Joint Stock Company (NCT) plans to pay at a rate of 80 percent, equivalent to VND 8,000 per share. Apatit Vietnam Phosphorus Joint Stock Company (PAT) is likewise paying dividends at a rate of 100 percent.

Nevertheless, the received dividends remain relatively low when compared against market share prices. For instance, FOC pays VND10,000 per share, whereas its market price at the time of distribution is roughly VND62,400, corresponding to a dividend yield of about 16 percent. PAT pays VND10,000 per share with a market price of around VND65,600, corresponding to roughly 15.2 percent. NCT pays VND8,000 per share with a market price of about VND82,500, corresponding to nearly 10 percent.

With common deposit interest rates hovering around 6 to 8 percent per year, a dividend yield of 12 percent to 16 percent clearly generates strong appeal. Nonetheless, experts suggest that investors should look beyond this single figure when making investment decisions and instead maintain a comprehensive vision.

Director Nguyen The Hoai of the Dong Nai Branch at Rong Viet Securities Corporation (VDSC) stated that a widespread misconception is viewing dividends as an extra gift granted by a business. In reality, when a firm pays cash dividends, the reference price of the stock is adjusted downward accordingly on the ex-dividend date.

For instance, a dividend of VND3,000 per share will cause the reference price to drop by roughly VND3,000 per share. Consequently, the total asset value fundamentally does not increase immediately at the moment of dividend distribution. In addition, cash dividends are subject to a personal income tax of 5 percent.

Only when the stock price recovers to offset the adjustment or continues to rise will investors attain incremental profits compared to before the dividend distribution. Conversely, if the stock price drops, investors may suffer losses regarding the stock value while simultaneously paying tax on the received dividend, Director Nguyen The Hoai analyzed.

Huynh Anh Huy, Head of Sector Analysis at Kafi Securities Corporation, observed that stocks with high dividends are better suited when the market moves sideways or undergoes a downturn. Under those conditions, the actually received dividends can function as a cushion, helping mitigate pressure while waiting for the market to recover.

According to Head Huynh Anh Huy, to prevent confusion between high dividends and high profits, investors should evaluate total profitability, comprising stock price fluctuations and actually received dividends, instead of focusing solely on the dividend yield.

If a business maintains high dividends while its stock price continuously drops or moves sideways over the long term, that could signal that the market is undervaluing the growth potential or financial health of the business. In such scenarios, a high dividend yield does not equate to high investment efficiency.

From a cash flow perspective, Director Nguyen The Hoai noted that if a business experiences negative operating cash flow over multiple periods yet still borrows debt or utilizes accumulated cash to sustain high dividends, this serves as a critical sign demanding special attention. A dividend payout ratio below 60 to 70 percent can be regarded as relatively safe. Chasing high dividends while ignoring financial health and business prospects can drive investors into a dividend trap.