Companies talk dividends, but don't pay

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VietStock FI English - 31 month(s) ago 1 readings

A number of listed companies have recently announced their intentions to pay high dividends on last year's profits, stirring investor appetites for their shares, but many analysts are warning that plans are worthless if companies lack the capacity to carry them out.

Late last month, natural gas distributor CNG Vietnam (CNG) said it would pay a 70-per-cent dividend on 2011 profits, 60 per cent of which would be paid in cash. CNG share prices have since increased by over 30 per cent in just one month's time, from VND22,000 (US$1.05) to around VND30,000 ($1.45) a share.

Market insiders warned investors not to rush to buy shares of companies announcing high dividends as many would end up postponing or even canceling the payments.

According to preliminary statistics compiled by the online financial website CafeF.vn, about 50 companies with share prices of below VND10,000 met their profit targets last year but failed to pay dividends on schedule, in whole or in part.

Ha Noi Investment General Corp (SHN) and some listed affiliates of construction giant Song Da Corporation, such as Song Da No 74 (S74), Song Da No 9.06 (S96) and Song Da No 6.04 (S64) have even delayed dividend payments from 2010, rolling them over to this year and attributing the delay to difficulties in cash flows.

"Whatever the reason, failing to keep the dividend payment promise negatively affects the companys' reputation," said one analyst who asked not to be named. "This also explains why many corporate bonds are not attractive to investors."

Thang Long Securities Co deputy director Quach Manh Hao said high lending rates have forced many companies to consider carefully how to allocate earnings, with many opting to re-invest in production rather than distribute dividends.

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