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

Numerous companies in the market are currently offering high cash dividends, often exceeding deposit interest rates. However, these substantial payouts do not guarantee high investment returns due to stock price declines and potential sustainability issues for companies. In 2025, several companies are distributing high cash dividends, such as FPT Online Services Joint Stock Company (FOC) at 100%, Sai Gon Song Tien Beer Commercial Joint Stock Company (SST) at 80.16%, Noi Bai Cargo Services Joint Stock Company (NCT) at 80%, and Apatit Vietnam Phosphorus Joint Stock Company (PAT) at 100%.

Despite these high dividends, they often fall short compared to market share prices. For instance, FOC pays VND10,000 per share with a market price of VND62,400, yielding around 16%, while PAT pays VND10,000 per share with a market price of VND65,600, yielding approximately 15.2%. NCT pays VND8,000 per share with a market price of VND82,500, yielding nearly 10%.

With deposit interest rates typically ranging from 6 to 8% per year, dividend yields of 12% to 16% attract strong interest. Nonetheless, experts caution investors to look beyond this single figure and consider the broader picture. Director Nguyen The Hoai of Rong Viet Securities Corporation (VDSC) highlights that investors frequently misconceive dividends as a bonus from companies.

In truth, paying cash dividends reduces the stock's reference price on the ex-dividend date. For example, a dividend of VND3,000 per share would lower the reference price by roughly VND3,000 per share. Therefore, the overall asset value does not instantly increase upon dividend distribution. Moreover, cash dividends are subject to a 5% personal income tax.

Only when the stock price recovers to offset this adjustment or continues to rise will investors see incremental profits compared to pre-dividend distribution levels. Conversely, if the stock price drops, investors may face losses from both the stock value and the taxed dividend. Huynh Anh Huy, Head of Sector Analysis at Kafi Securities Corporation, notes that high-dividend stocks suit sideways or downward market trends, as the dividends can act as a buffer while waiting for market recovery.

To avoid confusing high dividends with high profits, investors should evaluate total profitability, considering both stock price fluctuations and actual dividends, rather than solely focusing on the dividend yield. If a company maintains high dividends while its stock price continuously declines or remains stagnant over the long term, it may indicate that the market undervalues the business's growth potential or financial health.

In such cases, a high dividend yield does not equate to high investment efficiency. From a cash flow perspective, Director Nguyen The Hoai warns that if a company experiences negative operating cash flow over multiple periods but still borrows debt or uses accumulated cash to sustain high dividends, this is a critical warning sign requiring attention.

A dividend payout ratio below 60 to 70% can be considered relatively safe. Chasing high dividends without considering financial health and business prospects can lead investors into a dividend trap. Examples include BMP (Binh Minh Plastics Joint Stock Company) with dividends between VND8,400 and VND10,400 per share, VNM (Vietnam Dairy Products Joint Stock Company) with payouts between VND3,500 and VND4,000 per share, REE (Refrigeration Electrical Engineering Corporation) with dividends ranging from VND2,000 to VND2,500 per share, and DHG (DHG Pharmaceutical Joint Stock Company) with cash dividends between VND3,000 and VND4,000 per share.