Shareholders "some laugh, some cry"
While many bank shareholders were happy to receive dividends of 20-30% in cash and shares for 2023, on the contrary, many investors were sad because they had not received any dividends for many years. At the 2024 Annual General Meeting of Shareholders of Saigon Thuong Tin Commercial Joint Stock Bank ( Sacombank ) last weekend, shareholders continued to question the bank about not paying dividends. Mr. Duong Cong Minh, Chairman of the Board of Directors of Sacombank , explained that the charter capital must be returned and bad debt reduced to below 3% to be eligible for dividend payment. The debt related to Mr. Tram Be must wait for the Government's permission. Mr. Minh affirmed that this will definitely be completed this year and if the capital is returned, Sacombank will complete restructuring this year.
Some businesses have not paid dividends for many years despite large profits, disappointing shareholders.
This has also been a regular answer from Sacombank's leadership over the years about not paying dividends. The bank's last dividend was in 2015 at a rate of 20% in shares. So, 9 years have passed, Sacombank's shareholders have not received any money even though the bank continuously makes thousands of billions of dong in profits each year. By the end of 2023, Sacombank will have undistributed profits of 18,400 billion dong, equivalent to 100% of charter capital.
Or Vietnam Aviation Insurance Corporation (VNI) had a profit of VND 24.6 billion in 2023 but continued not to pay dividends to retain capital for business operations. The total retained profit by the end of 2023 reached more than VND 81.2 billion. Since 2017, this company has not paid dividends for 7 consecutive years.
Another large enterprise, GELEX Group Corporation, has undistributed profits by the end of 2023 of more than VND 2,616 billion. Of which, GELEX currently has VND 1,945 billion (equivalent to 22.84% of charter capital) as a source of dividends that can be distributed in cash. However, this enterprise will not pay dividends in 2023 to ensure capital for the company's production and investment activities. Last year, GELEX also did not pay dividends in 2022 even though its profit also reached more than VND 2,000 billion.
There are also companies that have postponed the payment of dividends for a decade, even though they have closed the shareholder list to pay dividends. For example, Lilama 45.4 Joint Stock Company (L44) has announced a change in the 9th dividend payment date. The 2012 and 2013 cash dividend payments have been postponed to the end of 2024. The reason given by the company, as in many years, is that it is facing many financial difficulties, outstanding debts for employee salaries, and large amounts of money to be paid to the budget (taxes, insurance, etc.), so it has not been able to arrange the source of money to pay dividends. Similarly, Song Da Urban and Industrial Park Development Investment Joint Stock Company (SJS) has not paid dividends for 2014 and 2017 for 8 years and continues to postpone the payment until the end of 2024. SJS's refrain is that the financial situation is still difficult, the company has not been able to arrange the source of money. Meanwhile, SJS's report by the end of 2023, accumulated retained earnings amounted to more than 202 billion VND.
It is worth noting that while shareholders of large enterprises are "frustrated" because they are in debt or do not receive dividends, there are small-scale companies with "cheap" stock prices that maintain high annual dividends. For example, Phan Thiet Garment Export Joint Stock Company (stock code PTG) announced that on May 13, it will close the list of shareholders to receive the first cash dividend payment of 2024 at a rate of 50%, equivalent to 5,000 VND per share. Notably, the dividend that PTG pays to shareholders is 10 times the price of this company's shares currently trading on the UPCoM floor. The company also plans to pay dividends for the whole year of 2024 at a total rate of 100%, equivalent to shareholders owning 1 share will receive an additional 5,000 VND. Thus, the dividend for the whole year will be 20 times the current stock price. Since being listed on UPCoM in early 2010, this textile company has continuously paid cash dividends to shareholders. In some years, the dividend rate has even reached 120%, equivalent to VND12,000/share and many times higher than the stock price on the stock exchange. Another unit, Yen Bai Forestry and Agricultural Products Joint Stock Company (CAP), will pay dividends at a rate of 100%, divided in half including cash and shares. If a shareholder owns 1 company share, they will receive VND5,000 in cash and 0.5 new shares. The amount of dividends paid alone accounted for nearly 50% of last year's profits...
Mr. Nguyen Hoang Hai, Vice President of Vietnam Association of Financial Investors
Declining reputation, difficult to attract long-term investors
Mr. Phan Dung Khanh, Investment Consulting Director - Maybank Investment Bank Securities Company, said that many shareholders, when investing in a stock, will compare dividends with bank deposit interest rates. This is the annual income that any investor will be interested in, especially investors with long-term investment tendencies such as organizations. According to regulations, when dividends are paid, the stock price is also adjusted down accordingly. If dividends are not paid but the stock price increases steadily, shareholders will be less upset. However, in the stock market, many stocks do not increase in price but even go backwards, so shareholders are even more "resentful" when waiting for dividends.
Mr. Khanh emphasized: After decades, the VN-Index is only hovering around 1,200 points. This shows that there are many stocks that have not increased in price compared to the previous decade. Therefore, if shareholders hold stocks for a long time and have not received dividends for many years, they are considered to have suffered heavy losses. Particularly for companies that have delayed dividend payments by up to 8-10 years, the management agency needs to consider and possibly add regulations requiring businesses to proactively publicly announce the reasons for not paying dividends. Because many companies have been silent or have only given sketchy, perfunctory reasons. This forces businesses to be responsible to shareholders.
Agreeing, Mr. Nguyen Hoang Hai, Vice President of the Vietnam Association of Financial Investors, commented: Investors who tend to buy stocks waiting for dividends will be disappointed when they fall into companies that have not paid any money for many years or have continuously "postponed" dividends. It is true that there are companies and industries that need to use retained profits to increase capital, supplement business operations or expand investment. However, it is not possible to continuously extend for 5-6 years without paying dividends. Because if considered according to the investment cycle, it only takes 3-4 years to record efficiency.
Not to mention that dividends can be calculated at a certain rate without requiring 100% of profits to be distributed. Many business leaders may also be the largest shareholders, so they may not need the money. But shareholders all want to receive dividends, especially profitable businesses. If a business retains profits to expand investment but is not effective, the rights of shareholders will be further affected. "For businesses that do not pay cash or stock dividends for many years, or even continuously delay paying dividends, their reputation in the eyes of many investors will certainly decrease sharply. This also does not encourage investors to hold stocks for the long term and accompany the business," Mr. Hai warned.
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