Companies hasten dividend payout to beat tax

VNStockNews.com - Listed companies are rushing to pay cash dividends and issue bonus shares, trying to beat a new income tax set for next year.

Local companies often distribute dividends to shareholders in the year following the investment, after they finish reporting business results. The process sometimes lasts until midyear.

But this year many companies have already announced cash payouts and bonus issues as they want to beat the January 1 deadline, when stock investors are required to pay a capital gains tax of 5 percent on their earnings from dividends and bonus shares.

Binh Dinh Minerals (BMC), for instance, said it would close its shareholder book on November 27 and pay a 10 percent dividend next month. Meanwhile, Vinh Son-Song Hinh Hydropower (VSH) promised both a 10 percent cash payout and a 50 percent bonus issue on December 18.

While investors are happy to receive the payouts early, analysts worry that listed companies would struggle with the time pressure as dividend payout procedures usually take around a month.

Analysts also said by advancing a lot of money for dividends before establishing final business results, companies may place many financial risks on themselves. Moreover, huge payouts can hurt their capital flows as the economy has not fully recovered yet.

Le Dat Chi, an economist at the Ho Chi Minh City University of Economics, was quoted by online news website VnExpress as saying that issuing a lot of bonus shares can only help improve liquidity and increase prices while having no effect on a company’s assets.

Investors should be cautious, Chi said, warning that a stock surge would not last long unless it was powered by real performance.