Investors embrace stock hunting and dividend eating for steady profits
During periods of market volatility, selecting defensive stocks with high dividend payments and strong market resilience is a suitable strategy for risk-averse investors.
A company's dividend policy is a perennially popular topic that takes centre stage during shareholder meetings. Within the investor community, a strategy known as "stock hunting and dividend eating" has gained significant traction for its proven success.
The deadline for finalising the shareholder meeting attendee list of Bình Minh Plastic Joint Stock Company (BMP) is approaching on April 2. Investors are eagerly awaiting the dividend policy for 2024 from BMP, known for its generous dividend payouts. During last year's shareholder meeting, the company's leaders even hinted at the possibility of maintaining high dividends until 2025. BMP has consistently maintained a cash dividend payout ratio of over 100 per cent for the past four years, from 2020 to 2023. In 2023, the company's dividend ratio reached an impressive 118 per cent.
Although BMP experienced an 11.2 per cent decrease in net revenue in 2023 compared to 2022, amounting to VNĐ5.15 trillion, the after-tax profit reached VNĐ1.04 trillion, representing a 50 per cent increase from the previous year. This was the highest profit level the company has achieved in its history.
BMP's stock price is at an all-time high, staying at around VNĐ111,300 per share. If the company maintains a 100 per cent dividend payout ratio (equivalent to VNĐ10,000 per share), the current dividend yield to the BMP stock price exceeds 9 per cent. This percentage is significantly higher than long-term savings interest rates, making it an attractive option for investors.
Đức Giang Chemical Group (DGC) Joint Stock Company will hold its annual shareholder meeting on Friday. The company's board of directors expects to present a revenue plan for 2024, projecting a 4.7 per cent increase to VNĐ10.2 trillion compared to the actual performance in 2023. However, they anticipate a 4 per cent decrease in after-tax profit to VNĐ3.1 trillion compared to the previous year. The proposed cash dividend payout ratio is 30 per cent, equivalent to a total dividend payment of VNĐ1.13 trillion. DGC shares have gained investor attention due to their impressive business performance and a history of high-profit distribution to shareholders. In 2023 alone, shareholders received dividends of up to VNđ4,000 per share, including VNĐ1,000 from 2022 and VNĐ3,000 as an interim dividend for 2023.
Sơn La Sugar Joint Stock Company (SLS) paid a cash dividend of VNĐ15,000 per share in 2023, corresponding to a dividend payout ratio of 150 per cent of its charter capital. This ratio exceeded the initial plan by 50 per cent. With an average trading price of around VNĐ150,000 per share, the dividend yield on SLS stock is approximately 10 per cent, twice as high as long-term savings interest rates.
Another company known for its substantial dividend payouts is the Cadivi Joint Stock Company (CAV). In 2023, Cadivi distributed five cash dividends, for a total payout ratio of 140 per cent. CAV is currently trading at VNĐ74,000 per share, which is still considered an attractive price when considering the dividend payout ratio in relation to the stock price.
Lê Đức Khánh, the Director of Strategy at VPS Securities Company, has provided insights on companies paying dividends above 100 per cent in the stock market. Such occurrences are rare, and these companies typically have high market prices and low liquidity, making it challenging to acquire significant quantities of their stocks. However, stocks with high dividend yields can be a viable choice for long-term investors.
After a dividend distribution, stock prices often adjust, and if they fail to increase, investors may not benefit or even incur losses if prices decline. Effective business growth prospects are the most significant factor in determining stock price growth potential, which companies can consistently achieve by offering high and regular dividends.
Companies like FPT Corporation (FPT), Bình Minh Plastic JSC (BMP) and Đức Giang Chemical Group (DGC) in this category have seen their stock prices quickly return to pre-dividend levels. For instance, FPT's stock price currently stands at around VNĐ115,000 per share, reaching a historical high due to sustained double-digit business growth prospects. FPT's 2024 shareholders' meeting documents indicate a target revenue of VNĐ61.85 trillion, a 17.5 per cent growth compared to the previous year, a pre-tax profit of VNĐ10.87 trillion, an 18.2 per cent growth, and an expected dividend of 20 per cent in cash, matching 2023 figures.
According to Khánh's recommendations, companies with sound business prospects and a history of maintaining solid dividends include banking, telecommunications technology, pharmaceutical, oil and gas, utilities, and insurance companies.
Nguyễn Anh Khoa, the Director of Analysis at Agribank Securities Company (AGR), suggests that during periods of market volatility, selecting defensive stocks with high dividend payments and strong market resilience is a suitable strategy for risk-averse investors. Criteria for selecting such stocks include stable cash flow, low-risk and low-volatility business models, a track record of regular dividend payments, and reasonable valuation. In addition to some banking stocks, companies in the hydropower, thermal power, pharmaceutical, beverage and sugar sectors are considered suitable, as they offer both business prospects and reasonable dividends. — VNS
