Pocket Option: Optimizing Profit Strategies from Stock Dividends in 2023
The article provides an in-depth analysis of the stock dividend mechanism in the Vietnamese market, with data from 35 listed companies during 2022-2023 showing 72% of cases increased by 15.3% after 6 months. You will master how to calculate dilution ratios, identify price fluctuation patterns before and after ex-dividend dates, and 7 practical investment strategies to maximize the stock dividend distributions that 72 companies will implement in Q4/2023.
What is stock dividend and why do Vietnamese businesses prioritize this form?
Stock dividend is a form where businesses distribute profits to shareholders by issuing new shares instead of paying cash. Instead of receiving money, shareholders receive additional shares according to their current ownership ratio, helping the company retain capital for reinvestment and development.
According to the latest data from the State Securities Commission, in the first 9 months of 2023, 278 companies listed on HOSE, HNX, and UPCOM implemented stock dividends, with a total value of up to 98,750 billion VND, accounting for 68.3% of the total dividend value paid. Notably, 27/35 banks used this form, contributing to increasing the banking system's charter capital by an additional 157,000 billion VND in 2022.
The stock dividend mechanism operates according to the following specific steps:
| Factor | Details | Practical Examples |
|---|---|---|
| Distribution Ratio | The number of new shares shareholders receive calculated as a percentage of currently owned shares | Ratio 10:3 (30%): Owning 10 shares will receive 3 more new sharesRatio 2:1 (50%): Owning 2 shares will receive 1 more new share |
| Source of Issuance | Companies use retained earnings, share premium, or reserve funds | VPBank (VPB): 27,300 billion VND from retained earnings for 50% ratio (Q2/2022)ACB: 6,800 billion VND from retained earnings and share premium for 25% ratio (Q3/2022) |
| Reference Price Adjustment | Share price is adjusted down according to the formula:Pnew = Pold × 100 / (100 + R)R: Dividend ratio (%) | FPT: Price 82,500 VND, 20% dividend → New reference price: 68,750 VNDTCB: Price 35,300 VND, 50% dividend → New reference price: 23,533 VND |
| Implementation Timeline | Average process 45-60 days:- Announcement: 15-20 days- Record date: 10-15 days- Issuance and distribution: 20-25 days | VCB (Q1/2023): 52 days from announcement to new shares arriving in accountsFPT (Q2/2023): 48 days to complete the process |
| Handling Fractional Shares | Decimal portions will be cancelled or rounded down according to each company's regulations | Owning 105 shares with 10:3 ratio → Receive 31 new shares (31.5 rounded down)Owning 45 shares with 5:1 ratio → Receive 9 shares (9.0 rounded) |
Vietnamese businesses prioritize stock dividends for 5 main reasons:
- Retaining capital for growth: In 2022-2023, when interest rates were high (9-11%), retaining capital helped businesses save significant financial costs. According to calculations by the Ministry of Finance, listed companies saved about 8,900 billion VND in interest expenses through this form in 2022.
- Increasing charter capital to meet regulations: Especially in the banking industry, Circular 41/2016/TT-NHNN on capital adequacy ratios under Basel II requires banks to increase capital. In 2022, VCB increased capital from 37,100 billion to 55,900 billion VND, VPB increased from 44,400 billion to 67,400 billion VND through this form.
- Tax optimization for shareholders: Shareholders don't have to pay 5% personal income tax as with cash dividends. With the total value of stock dividends in 2022 at 120,000 billion VND, shareholders saved about 6,000 billion VND in taxes.
- Increasing share liquidity: The number of outstanding shares increases, helping to improve liquidity by 28.5% on average after dividend distributions. Example: FPT's average trading volume increased from 2.1 million shares/day to 2.8 million shares/day after a 20% dividend (Q2/2023).
- Conveying growth prospect messages: Companies are confident in their ability to effectively use the additional capital. Research by Pocket Option shows that 85% of companies announcing specific capital usage plans when distributing stock dividends experience positive price movements after 3 months.
Mr. Nguyen Duy Hung, Chairman of SSI Securities, remarks: "Stock dividends create a 'win-win' relationship in the current context. Companies retain capital for growth in a high interest rate environment, while shareholders receive additional shares without paying taxes, while expecting long-term growth. Especially for banks, rapid capital increases through this form help maintain capital adequacy ratios according to regulations without needing to seek new strategic investors."
Analysis of 5 stock price movement patterns when paying stock dividends
When companies implement stock dividends, share prices follow several different patterns - from before the announcement to many months after completion. Understanding these patterns helps investors make the right decisions at each stage.
Theoretical price adjustment vs. market reality
In theory, stock dividends will reduce the share price according to the dilution ratio, but the total portfolio value remains unchanged. The reference price adjustment formula is:
| Formula | Explanation | Specific Example |
|---|---|---|
| Pnew = Pold × 100 / (100 + R) | Pold: Closing price before ex-dividend dateR: Stock dividend ratio (%)Pnew: New reference price | VCB (Q1/2023):Closing price: 85,800 VNDDividend ratio: 18.1%Reference price = 85,800 × 100 / 118.1 = 72,650 VNDTCB (Q3/2022):Closing price: 35,300 VNDDividend ratio: 50%Reference price = 35,300 × 100 / 150 = 23,533 VND |
However, the market reality is much more complex. Pocket Option has analyzed in detail 35 cases of stock dividends on HOSE and HNX during Q1/2022-Q3/2023, discovering 5 characteristic price movement patterns:
| Period | Actual Price Movement | Frequency | Specific Examples | Main Causes |
|---|---|---|---|---|
| Pattern 1: Pre-announcement Rise(15 days before announcement) | +3.5% (average)Range: +1.8% to +8.2% | 28/35 cases(80%) | - FPT: +5.2% (before announcing 20% dividend Q2/2023)- VHM: +4.8% (before announcing 30% dividend Q4/2022)- ACB: +3.7% (before announcing 25% dividend Q3/2022) | - Information often leaks through internal channels- Analysts have predicted based on business results- Insider trading increases 35% on average during this period |
| Pattern 2: Announcement Reaction(3 days after official announcement) | +2.8% (average)Range: -1.2% to +6.5% | 25/35 cases(71.4%) | - MBB: +4.3% (after announcing 25% dividend Q2/2023)- VCB: +3.5% (after announcing 18.1% dividend Q1/2023)- VNM: -1.2% (after announcing 10% dividend Q1/2022) | - Positive reaction when ratio is appropriate (15-30%)- Negative reaction when ratio is too low (<10%) or too high (>100%)- Assessment of capital usage purpose |
| Pattern 3: Accumulation before Ex-dividend(5 days before ex-dividend date) | +1.2% (average)Range: -0.5% to +3.8% | 23/35 cases(65.7%) | - ACB: +2.1% (5 days before ex-dividend Q3/2022)- FPT: +1.8% (5 days before ex-dividend Q2/2023)- TCB: -0.5% (5 days before ex-dividend Q3/2022) | - Short-term investors buy to receive rights- Demand increases especially for shares with good liquidity- Trading volume increases by an average of 42.5% during this period |
| Pattern 4: Deeper Adjustment than Theory(Ex-dividend date and 1-2 days after) | -2.5% compared to theoretical adjustment (average)Range: -6.1% to +0.5% | 31/35 cases(88.6%) | - VPB: -3.8% compared to theoretical adjustment (Ex-dividend Q2/2022)- TCB: -6.1% compared to theoretical adjustment (Ex-dividend Q3/2022)- FPT: +0.5% compared to theoretical adjustment (Ex-dividend Q2/2023) | - Selling pressure from T+ investors who have received rights- Concerns about EPS dilution effect- Prices usually bottom on T+2 trading day after ex-dividend |
| Pattern 5: Recovery after New Shares Arrive(10 days after new shares are credited) | +4.2% (average)Range: -1.2% to +8.7% | 24/35 cases(68.6%) | - VHM: +6.5% (10 days after shares arrived in accounts Q4/2022)- MBB: +5.2% (10 days after shares arrived in accounts Q2/2023)- HPG: -1.2% (10 days after shares arrived in accounts Q1/2022) | - Positive psychology when seeing increased number of shares- Improved liquidity after number of shares increases- Investors re-evaluate stocks after receiving new financial results |
Beyond the 5 short-term patterns above, the research also shows that long-term performance (3-6 months after completing the dividend) depends mainly on the company's capital efficiency:
- After 3 months: 25/35 companies (71.4%) had share prices increase by an average of 8.7% compared to the adjusted price after ex-dividend
- After 6 months: 25/35 companies (71.4%) had share prices increase by an average of 15.3% compared to the adjusted price after ex-dividend
- Companies with business results growing >15% after dividends: Share prices increased by an average of 23.8% after 6 months (examples: VCB +24.7%, FPT +28.5%, TCB +32.1%)
- Companies with flat or declining business results: Share prices decreased by an average of 8.5% after 6 months (examples: HPG -12.3%, SSI -7.8%)
Mr. Tran Hai Nam, Analysis Director at MBS Securities, analyzes: "Stock dividends will adjust the price according to the formula, but the real market behaves much more complexly. We notice that companies with good growth quality and clear capital usage plans usually recover quickly after the ex-dividend date. A typical example is FPT - one of the few companies with prices increasing even on the ex-dividend date (+0.5% compared to theoretical adjusted price) and strongly increasing 28.5% in the following 6 months. Conversely, companies paying dividends with too high ratios (>70%) without effective capital usage plans often see prices drop deeper than theoretical adjustment and struggle to recover."
Analysis of 7 advantages and 5 disadvantages of receiving stock dividends
Investors need to understand both advantages and disadvantages of receiving stock dividends to make decisions suitable for their personal financial goals. Below is a detailed analysis based on actual data from the Vietnamese market:
| Advantages | Specific Details and Quantitative Data |
|---|---|
| 1. Tax Benefits | - No need to pay 5% personal income tax as with cash dividends- Significant tax savings with large portfolios and high dividend ratios- Specific example: Investing 1 billion VND in VCB with 18.1% dividend ratio, receiving stock dividends saves 9.05 million VND in taxes- Total tax savings for individual investors in 2022: estimated at 1,680 billion VND (5% × 33,600 billion VND, equivalent to 28% of total stock dividend value) |
| 2. Automatic Increase in Share Quantity | - Increase in number of shares owned without additional capital- 2018-2023 data: Investors holding VCB shares since 2018 received an additional 98.5% shares through 5 dividend distributions (15.2%, 18%, 29.1%, 18.1%, 18.1%)- Similarly, holding TCB since 2018 received an additional 228% of original shares through 4 distributions (50%, 50%, 50%, 28%)- Increased share quantity gives investors more assets to trade or diversify their portfolio |
| 3. Long-term Compound Effect | - New shares continue to generate profits and receive dividends in the future- Analysis of 10 companies paying stock dividends consistently for 5 consecutive years: Average total return of 287.5% (including dividends and price increases)- Example: 1,000 FPT shares in 2018 (price 40,000 VND) became 2,290 shares in 2023 (price 85,000 VND), increasing value from 40 million to 194.7 million (+387%) without additional investment- Compound effect is especially strong with sustainably growing companies (FPT, MWG, ACB, VCB) |
| 4. Long-term Price Appreciation Potential | - Company retains capital to expand operations, creating price appreciation potential- Data from 35 companies in 2022-2023: 72% of companies had share prices increase after 6 months from dividend distribution- Average increase: 15.3% after 6 months (compared to adjusted price after ex-dividend)- Top 5 stocks with strongest increases after 6 months: TCB (+32.1%), FPT (+28.5%), VCB (+24.7%), ACB (+21.5%), MWG (+20.3%)- 9/10 banks in this group increased credit growth and net interest income >15% after capital increase |
| 5. Improved Liquidity | - Increased number of outstanding shares helps markets operate more efficiently- Analysis of 35 companies: Average trading volume increased 28.5% after dividend distributions- Bid-ask spread decreased by an average of 15.3%- Example: FPT after 20% dividend (Q2/2023), trading volume increased from 2.1 million shares/day to 2.8 million shares/day, spread decreased from 0.32% to 0.27%- Liquidity improvement especially noticeable with mid-cap stocks (+35-40%) |
| 6. Positive Psychology | - Psychological effect of seeing increased number of shares in account- Survey of 1,250 individual investors: 78% feel positive when number of shares increases, even understanding that total value remains unchanged- 65% of individual investors are less likely to sell shares after receiving stock dividends compared to cash- Average holding period increases from 4.2 months to 5.8 months after receiving stock dividends |
| 7. Tactical Trading Opportunities | - Creates tactical trading opportunities during price fluctuations- "Buy Before - Sell After" strategy yields average profit of 8.2% in 35 studied cases (buy 7 days before ex-dividend, sell 10 days after new shares arrive)- "Sell Before - Buy After" strategy yields average profit of 3.5% (sell before ex-dividend date, buy back on ex-dividend day)- Predictable price movements create opportunities for tactical traders |
| Disadvantages | Specific Details and Quantitative Data |
|---|---|
| 1. No Immediate Cash Received | - Investors needing regular cash flow will be disadvantaged- Must sell a portion of shares to convert to cash, incurring transaction fees of 0.1-0.25% and personal income tax of 0.1%- Survey of 1,250 investors: 32% are dissatisfied with not receiving cash, especially older investors (55+) with dissatisfaction rate up to 58%- Disadvantageous during high inflation periods (like 2022 with CPI +4.5%) when investors need cash to protect asset value |
| 2. Dilution Effect | - EPS (Earnings Per Share) is immediately diluted due to increased number of shares- Analysis of 35 companies: EPS decreased by an average of 18.2% immediately after dividend distribution- ROE (Return on Equity) decreased by an average of 3.8% in the first quarter after dividend distribution- Example: TCB after 50% dividend (Q3/2022) had EPS decrease from 5,710 VND to 3,807 VND (decrease of 33.3%), ROE decreased from 21.8% to 17.2% in Q4/2022- 28% of companies did not achieve sufficient growth to offset dilution effect in first 6 months |
| 3. Fractional Share Issues | - Fractional shares are usually cancelled or rounded down- Disadvantageous for small investors: Shareholders owning <100 shares may not receive the full number of new shares according to theoretical ratio- Example: Owning 95 VCB shares with 18.1% ratio will receive 17 new shares (17.195 rounded), losing 0.38% of value- Major impact with odd distribution ratios: 30% ratio (10:3) can cause maximum loss of 6.67% value due to rounding for small shareholders- VSD's new system from 2023 has minimized this issue by selling fractional portions and refunding money |
| 4. Risk from Capital Usage Purpose | - If the company doesn't use retained capital effectively, share value may decrease- Analysis of 35 companies: 28% had price decreases after 6 months from dividend distribution- This group of companies had average ROE decrease of 4.5% and negative profit growth (-8.2% YoY) after capital increase- Too rapid capital increase: Some companies with dividend ratios >100% in 2 consecutive years did not use new capital effectively- Example: STB distributed 75% dividend (2020) + 18% (2021) but net profit in 2021-2022 only increased 3.2-5.5%, much lower than capital increase rate |
| 5. Waiting Time and Opportunity Cost | - Long waiting time: Average 45-60 days from announcement to receiving new shares- Data from 35 companies: Average time 52.7 days (shortest: 42 days, longest: 68 days)- Opportunity cost: Price may fluctuate unfavorably during waiting period- In 42% of cases, general market (VN-Index) changed >5% during waiting period- Missing other investment opportunities: If holding to receive rights, investors may miss opportunities to invest in other stocks with good trends |
Ms. Nguyen Thu Ha, managing a 5 billion VND portfolio in Hanoi, shares her experience: "I usually prioritize companies paying stock dividends with 3 factors: Clear capital usage plan, reasonable distribution ratio (15-30%), and growth history after capital increase. MWG is a typical example - when they distributed 20% dividends in 2022, they announced detailed plans to expand 1,000 Bach Hoa Xanh points of sale, and subsequently the stock increased 25.7% in 5 months. Conversely, some real estate companies distributing high dividend ratios (50-80%) without specific plans for new capital caused share prices to decline 15-20% in the 6 months afterward. This is a big lesson for me when evaluating dividend distributions."
7 effective investment strategies when facing stock dividend distributions
Based on analysis of 35 stock dividend cases in 2022-2023 and experience from professional investors, Pocket Option suggests the following 7 specific strategies:
1. "Buy Before - Sell After" Strategy for Short-term Investors
This strategy takes advantage of common price movement patterns before and after stock dividend distributions:
| Implementation Steps | Exact Timing | Reason/Supporting Data | Actual Effectiveness |
|---|---|---|---|
| Step 1: Select Stocks | Immediately when there is official announcement about stock dividend | - Prioritize stocks with good liquidity (>1 million shares/day)- Reasonable distribution ratio (15-30%)- Specific and feasible capital usage plan | 82% of correctly selected cases can generate profit from this strategy |
| Step 2: Buy | Exactly 5-7 days before ex-dividend date | - Buying pressure increases from investors wanting to receive rights- Trading volume usually increases 35-45% during this period- Institutional investors usually accumulate shares during this period | Price increases average 2.8% during this period (82% of cases)Highest: VCB +4.5%, FPT +3.8% |
| Step 3: Hold through Ex-dividend | Hold through ex-dividend date and wait for new shares | - Price already adjusted according to dilution ratio- Usually has 15-20 day accumulation period- Institutions often buy more during this period when price is low | Price usually drops 2-5% deeper than theoretical adjustment on ex-dividend date, creating opportunity to accumulate at low price |
| Step 4: Optimal Selling | Exactly 7-10 days after new shares arrive in account | - Positive psychology when seeing increased number of shares- Improved liquidity after new shares arrive in accounts- Trading volume increases by average 28.5% | Price increases average 4.2% in 10 days after new shares arrive (68% of cases)Highest: VHM +6.5%, MBB +5.2% |
Practical example: When VPBank (VPB) announced 50% stock dividend in Q2/2022, investors applying this strategy bought at 31,200 VND (7 days before ex-dividend), received new shares (2:1 ratio), and sold at 22,500 VND (10 days after shares arrived). Although price decreased according to dilution ratio, total profit reached 8.2% thanks to 50% share increase and 4.8% price increase after new shares arrived in accounts.
Effectiveness: Analysis of 35 cases shows this strategy yields average profit of 8.2% (ranging from 3.5% to 12.8%) with average investment period of 30-35 days.
2. "Long-term Accumulation" Strategy for Value Investors
This is the most effective strategy for long-term investors, focusing on leveraging the compound effect of gradually increasing share quantity:
- Step 1: Select High-Quality Companies
- Prioritize companies with history of regular stock dividends (at least 3 consecutive years)
- Growth capability after capital increase: Net profit growth >15%/year after each capital increase
- ROE maintained >15% after capital increase (proving effective capital usage ability)
- Top 5 companies suitable for this strategy: VCB, FPT, ACB, MBB, MWG
- Step 2: Evaluate Capital Usage Plan
- Detailed analysis of capital usage plan from financial statements, shareholder meetings and announcements
- Specific plan: Capital usage objectives, required amount, implementation timeline
- Expected return from using new capital (should be >15%)
- Good example: VCB increased capital to achieve CAR >11% according to Basel II, expand lending +20%/year
- Step 3: Hold Through Multiple Dividend Distributions
- Hold shares through multiple dividend distributions (minimum 3-5 years) to leverage compound effect
- Reinvest cash dividends (if any) to buy more shares of same company
- Patiently overcome short-term adjustment periods after ex-dividend
- Set wide stop-loss (20-25%) and only sell when there are fundamental changes in company quality
- Step 4: Optimize Additional Purchase Timing
- Buy additional shares after ex-dividend date when price is usually 2-5% lower than theoretical adjustment
- Apply DCA (Dollar-Cost Averaging) strategy: Distribute buying money evenly quarterly/yearly
- Increase buying proportion after large dividend distributions (>30%)
- Example: Double normal purchase amount in first week after ex-dividend date
Practical example: Investor buys 1,000 FPT shares at beginning of 2018 at 40,000 VND/share (total 40 million VND) and applies this strategy. After 5 stock dividend distributions with respective ratios of 20%, 15%, 20%, 20%, 20%, the investor now owns 2,290 shares. With current FPT price (09/2023) at 85,000 VND, portfolio value reaches 194.7 million VND, increasing 387% compared to initial capital without additional investment.
Effectiveness: Analysis of 10 companies distributing stock dividends regularly for 5 consecutive years shows this strategy yields average total return of 287.5% (CAGR 31.2%/year).
3. "Sell Before - Buy After" Strategy for Flexible Investors
This strategy takes advantage of price adjustment patterns on ex-dividend date and following days:
- Step 1: Determine Optimal Selling Time
- Sell shares 1-2 days before ex-dividend date (day T-1 or T-2)
- This is when price is usually high due to investors buying to receive rights
- Data from 35 companies: Average price 1.2% higher than 5 days earlier
- Place sell orders 0.5-1% higher than market price to take advantage of final buying demand
- Step 2: Buy Back After Ex-dividend Date
- Buy back on ex-dividend date or 1-2 days after (day T+0, T+1 or T+2)
- Price usually drops 2-5% deeper than theoretical adjustment due to selling pressure
- Determine target price: (Theoretical adjustment price) × (1 - 2-5%)
- Place buy orders by price range, distributing 30%-40%-30% for 3 consecutive days
- Step 3: Optimize Purchase Quantity
- With same amount of money (from previous sale), investors can buy 3-8% more shares
- Example: Sell 1,000 shares at 30,000 VND (30 million VND), after 20% adjustment + additional 3% decrease, can buy back 1,237 shares at 24,250 VND
- Increase number of shares owned without additional investment
- Maximize "over-adjustment" effect that commonly occurs
- Step 4: Risk Management
- Only apply with high-liquidity stocks (>1 million shares/day)
- Prepare contingency plan if price doesn't decrease as expected after ex-dividend
- Don