Evaluation of Dividend Payment Situation of Listed Companies on Hose Stock Exchange

is the issue that many shareholders are concerned about. Revenue from insurance premiums was 1,800 billion VND, an increase of only 5.3% compared to 2007; profit after tax was only 136 billion VND, an increase of 2.7% compared to 2007. The reason here is that the commission rate paid to agents increased in most operations (according to the decision of the Ministry of Finance), causing the commission cost in 2008 to increase by an estimated 57 billion VND; secondly, the business management cost increased by about 20-30 billion VND. The decline in the stock market is also the reason why Bao Minh's profits were affected because 40% of Bao Minh's total investment capital profit comes from securities trading.

In the difficult situation of the stock market in 2007, most shareholders want to receive cash dividends, but in reality, the cash dividend policy does not help investors reduce losses but also causes many difficulties for businesses in raising capital. In difficult economic conditions, businesses cannot avoid the situation of rising prices, production output facing obstacles due to reduced consumption, export markets being affected by exchange rates and the possibility of a global economic recession... The source of capital mobilized from the stock market is narrowed due to investor opposition, bank loans have high interest rates,... Therefore, undistributed profits from the previous year become a very important source of capital and need to be retained for reinvestment or reserve for upcoming difficulties. This is something that many businesses are very aware of. Therefore, paying dividends in cash makes it even more difficult for businesses to find additional sources of capital. Another reason is that for businesses that are still doing really well (although not as well as last year) but their stock prices are falling sharply, paying dividends in shares, although a bit difficult, will bring benefits to both sides: the business and shareholders. Paying dividends in shares still helps businesses retain profits for reinvestment, increase charter capital to expand lending limits or mobilize capital (for

banking industry),…. More deeply, paying this dividend will increase value for shareholders in the future, still based on the business performance of the enterprise itself.

2.2. Evaluation of dividend payment situation of listed companies on HOSE Stock Exchange

2.2.1. Results achieved

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Through the dividend payments of listed companies on the Ho Chi Minh City Stock Exchange, a common point that is easy to see is that most companies try to maintain a stable dividend level over the years. Maintaining a stable dividend level has brought benefits to both the company and shareholders. For shareholders, maintaining a stable dividend policy is an optimistic sign that the company is operating effectively, so their future income stream is also stable. For the company, maintaining a stable dividend policy creates conditions for the company to have long-term development orientations and strategies, with specific goals and policies, and is less affected by sudden fluctuations in the surrounding environment. In addition, a stable dividend strategy also helps the company's shareholder composition to be more stable, creating favorable conditions for company management. In general, the dividend policy of listed companies has achieved certain results as follows:

2.2.1.1. Maintaining a stable dividend policy is one of the important factors that make the company's image better in the eyes of investors.

Over the years, apart from a few listed companies that have a stock dividend payout strategy, most other companies have maintained a stable cash dividend. A stable dividend policy is implemented to help businesses maintain their position in the industry by increasing operational efficiency and satisfying shareholders with the dividends received.

annually. Investors buy shares of these companies because these are low-risk stocks, and at the same time, they satisfy their need for current income with stable income from dividends. In addition, with a stable dividend level, the company's stock price will remain high because investors tend to value more the dividends they are sure to receive. With a high dividend payout ratio, always concerned about their image in the market, Refrigeration Electrical Engineering Corporation (REE), Binh Thanh Gilimex Production, Trading and Import-Export Corporation (GIL) have high cash dividend payout rates, their shares are always traded at quite high prices in the market. In addition, with high dividend income, shareholders can easily find opportunities to reinvest dividend income, and they can invest in their own company or diversify their investment portfolio into other types of securities or investment forms.

2.2.1.2. Listed companies have responded flexibly to market situations.

In the situation where the stock market has been declining for a long time with strong intensity since the end of 2007, causing many difficulties for enterprises in coming up with capital mobilization plans, many companies have grasped the financial market situation and have come up with flexible plans to have capital for production and business while still satisfying the requirements of investors.

If in 2006, when the stock market was still in a fever of rising prices, individual investors buying stocks were mainly interested in finding profits from price differences rather than receiving dividends, so the option of paying dividends in stocks was warmly welcomed by investors, then from the end of 2007, the market went down so shareholders of most businesses were not interested in the option of paying dividends in stocks. Therefore, many businesses chose the 50/50 option. Oil and Gas Drilling and Services Corporation (stock code

PVD Securities Corporation has decided to pay dividends in 2007 in part cash and part stock. Profit after tax in 2007 was 124.27 billion VND, PVD has proposed a plan to pay dividends in part stock to increase charter capital, in order to serve the production-business and investment needs of the Corporation. However, in the context of the current economic situation with the solution of tightening monetary policy to control inflation, PVD has paid dividends in 2007 in both cash and stock to benefit both the enterprise and investors. For shareholders, a reasonable number of shares issued and issued to existing shareholders on the stock market will not greatly affect the stock price. For the corporation, in the current difficult financial situation with high capital costs, retaining a portion of cash flow from profits to pay dividends through issuing shares to supplement investment capital is considered an effective solution, reducing the need for loans and increasing profits for the corporation.

However, there are also companies that have predicted the situation and have changed their plans to pay dividends in cash instead of in shares to avoid diluting the stock price. Vietnam Dairy Products Joint Stock Company (Vinamilk - stock code VNM) has approved a 2007 dividend of 29% in both cash and shares.

2.2.2. Limitations

Because the form of joint stock company is still quite new in Vietnam and has not really promoted its full strength, the dividend policy at some joint stock companies is not really effective, bringing the highest benefits to businesses. Through the dividend payment of businesses, it is easy to see that most businesses have not yet proactively built a dividend policy to maximize business value.

The dividend itself means that shareholders sit down and decide how the profits will be divided. The important thing is the division of

Profit sharing must be appropriate to the business situation and development of each enterprise. If the enterprise needs investment capital, especially in the case of new and developing enterprises, it is advisable to increase retained earnings and pay less dividends; when the enterprise is stable, the dividend level should be raised high, even very high. Most joint stock companies in Vietnam have difficulty in making dividend policy decisions. In addition to listed companies with clear dividend payment policies such as REE, SACOM, ... which have created a certain trust and clear direction for the investing public, at some other companies, their dividend payments follow the general trend, their awareness as well as the ability to implement financial management strategies and build dividend payment policies are still limited, the dividend payment level often follows the average trend of the market over the years. Therefore, companies only pay attention to the payout ratio, however, with that payout ratio, the dividend profit that must be paid is often very high in the total after-tax profit that the company earns. However, with a long-term development strategy, high dividend profit, the income left after tax will decrease significantly, if the company has a need to reinvest, expand production and business to grow, it will encounter many difficulties.

2.2.2.1. Dividend payments by companies are often not based on the company's capital structure and investment needs.

A paradox for joint stock companies in Vietnam is that they have to satisfy the demand for high dividends while lacking capital for development investment. The capital of a business includes equity and debt capital. Most businesses currently raise capital through debt capital, usually by borrowing from banks (issuing corporate bonds is very rare). This is an unsafe method, and can even turn the business into a "debtor", the business will be under great pressure of interest rates.

In fact, many Vietnamese enterprises have not yet built an optimal capital structure for their enterprises. They do not know how to build the capital structure of the enterprise, how much equity, how much bank loans to maximize the value of the enterprise. Therefore, the enterprise's dividend payment decisions are not based on a reasonable capital structure. In the past, some enterprises, especially listed enterprises, often tend to want to maintain high dividend levels to gain investor confidence, although they should reinvest and expand to accelerate the capital accumulation process, in order to increase their value. With the current general upward trend in stock prices in the market, the dividend level is not entirely based on the business results of the enterprise. Most businesses, such as commercial banks with dividend payout ratios of over 50%, rely on surpluses from the difference in share prices from par value to domestic and foreign strategic shareholders, or to existing shareholders. This further increases the value of the Bank's shares with quite attractive dividend rates. However, when the capital structure stabilizes at the level prescribed by the State Bank or at the level that the banks' own capacity allows, maintaining a high and stable dividend rate is a major challenge for business operations.

2.2.2.2. Most joint stock companies are under pressure from high dividend payments.

Most of the effective joint stock companies have had a high cash dividend payment policy in recent years, commonly from 12% - 30% of charter capital and accounting for about 30% - 80% of after-tax profit. In the current stock market conditions, maintaining a high cash dividend payment rate also has many limitations. Most listed companies in Vietnam are in the development stage, so they need to focus capital on investing in projects that bring economic efficiency rather than trying to maintain a stable dividend payment rate to please shareholders.

Investors. With such a high level of cash dividends, the accumulated capital of companies will be reduced due to the need to use cash to distribute to shareholders. This is very risky and such dividends may be a burden, causing many businesses to no longer have the necessary capital to reinvest and develop business activities, so the investment speed in projects is also affected. Moreover, paying high cash dividends, making the total amount of dividend payments even larger, especially for large-scale businesses, can also increase bank loans and thus increase the total amount of interest, reducing after-tax profits.

It is undeniable that shareholders' expectations for high dividends are completely reasonable, but high dividends do not mean that the business is highly efficient. Thus, any business that does not pay dividends does not mean that the business is incapable of generating profits or is operating at a loss. Most investors, when investing in a joint stock company through buying shares or buying stocks on the stock market, look at the dividend level that the company pays. This is the understandable psychology of short-term investors, who consider buying shares similar to saving money. This psychology is most clearly demonstrated at the company's general meeting of shareholders, where shareholders set goals with the Board of Directors. Therefore, most companies try to maintain a high and stable dividend level to please investors. This is really a huge pressure for the company's management board.

2.2.2.3. Paying high dividends is used by companies as a tool to polish their corporate image.

Dividends are the profits distributed to shareholders, after deducting obligations to the state and setting aside funds as prescribed in the company's charter. Such a high dividend level easily means high profits. A company that pays high dividends is also considered a "successful" company and the Board of Directors

have capacity. For companies listed on the stock market, the dividend level is also an important factor in the buying and selling decisions of new investors, in addition to assessments of the potential for stock price increases and decreases. For these investors, holding shares while there is no opportunity to sell to enjoy the price difference, receiving dividends is exactly like depositing savings. The higher the dividend level, the more beneficial it is for the investor. A stock with a low dividend level is often undervalued and has poor liquidity. This way of evaluating has turned the dividend policy of many businesses into a tool to polish their image. Here, there is a conflict in the pursuit of interests between the two parties: the business and the shareholders. This conflict stems from the difference in investment objectives between major shareholders (linking the interests of the enterprise with their own interests in the long term) and small shareholders (temporary shareholders, short-term investment) of the same company, and more deeply, it is the limitation in the level of analysis and evaluation of investors. Many investors are only interested in information about dividend payments rather than information about the business situation of the enterprise. Therefore, many companies are well aware of this, they often offer attractive dividend levels to create a feeling of "effective operation", creating a sense of security for employees. However, with such a high dividend payment, shareholders benefit but the growth opportunity of the enterprise is very low, even leaving a debt burden. Currently, there is no precedent or regulation to deal with boards of directors using dividends as a way to appease shareholders when the company's business is ineffective.

2.3. Causes

Dividend policy is considered one of the key decisions in financial management of a joint stock company because it greatly affects the survival of each enterprise. In fact, many enterprises are facing

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