Open-ended fund pays dividends for first time

By Thy An   June 13, 2024 | 07:00 pm PT
DCDE open-ended fund investors will receive VND1,300 per share, a profit in addition to the fund value appreciation reaching a record level of 23.37%.

This value is calculated based on the dividend ratio of 13% per share (par value).

Accordingly, from the 23.37% return as of December 31, 2023, the fund will allocate 5% to distribute dividends to investors and retain 18.37% to continue investing and generating profits.

"We will maintain the annual dividend yield at 3-5%, quite a high number," said Hanh Luong, Head of Asset Management at Dragon Capital.

Based on the distribution plan announced on May 28, the fund will transfer cash dividends to the registered account number on June 26, following the investor registration cut-off date on June 6.

The dividend distribution was revealed earlier by Loc Nguyen, Associate Director, Portfolio Management of Dragon Capital at the 2023 Annual General Investor Conference (AGM) organized on May 7.

During the AGM, the announcement of Vietnam's first cash dividend from an open-ended fund, while lacking a specific payout ratio, garnered considerable interest from investors.

Investors checking market information. Photo by VnExpress/Nhat Phuong

Investors checking market information. Photo by VnExpress/Nhat Phuong

2023 was also a year when DCDE achieved outstanding growth.

In addition to capital appreciation, open-ended fund investors receive an additional source of income from cash dividends.

The remaining assets in the portfolio are stocks that continue to have upside potential, in line with the growth of the stock market.

Through this, fund investors achieve both recurring income and long-term growth.

Specifically, in terms of growth, at the end of 2023, the fund's net asset value (NAV) increased by 8%, while the NAV price per share (NAVPS) increased by 23.37% compared to 2022.

On December 31, 2022, the NAVPS reached VND20,506, and in 2023, this number increased to VND25,299.

NAV and NAVPS are both important indicators to evaluate the effectiveness of the fund.

The NAV represents total assets (minus debts and fees). The NAVPS is calculated by dividing the net asset value by the total number of fund shares in circulation.

When NAV and NAVPS grow, it means the profits of open-ended fund investors increase.

Index Dec. 31, 2023 Dec. 31, 2022
NAV 400.540.310.832 370.667.339.194
NAVPS 25.299,65 (increase by 23,37%) 20.506,61

DCDE's growth rate of 23.37% is considered a bright spot as it nearly doubled the increase of the VN-Index (12.2%).

According to Hanh Luong, the cash dividend payment plan is quite popular worldwide, but in Vietnam, DCDE is the pioneer among open-ended equity funds to pay cash dividends.

The strategy proposed by the fund aims to optimize returns for investors while changing the mindset of the market.

She added that in the global market, there is a tendency to look for assets that generate passive and sustainable income from dividends.

According to data from Lipper (a global provider of independent fund content, analytics and insight), total asset under management (AUM) of dividend focused passive income products doubled in just more than three years, from US$100 billion on July 31, 2020 to more than US$300 billion on July 31, 2023.

Loc Nguyen elaborated that stock investment is not solely about "buy low and sell high," a popular belief held by investors.

He highlighted DCDE as an example, demonstrating how stocks can provide passive income in the form of annual dividends.

Thanks to effective operations, profits can be distributed to shareholders while still maintaining sufficient cash to respond to investment requirements next year.

This also meets the needs of investors by creating a stable income stream when investing money in financial products.

Regular dividend payment becomes one of the reliable sources of income, increasing the efficiency of asset allocation while optimising long-term financial security.

Similar to buying an apartment for rental income, if an investor buys fund shares for VND10,000 per share and this fund pays annual cash dividends of VND1,000 per share, it would take 10 years to recoup the initial investment through dividends.

At the same time, the fund share price, like the property value, also appreciates over time.

Similarly, companies in the fund’s portfolio continue to grow and generate profits through their business operations.

Once the initial investment is recouped, any dividends received becomes net profit, and investors benefit from the growth of the fund at zero cost of capital.

"Funds that pay cash dividends are an attractive investment option for those looking for stability, regular cash flow, and long-term capital growth potential," Loc said.

Last year, despite the short-term market volatility, DCDE’s investment team still persisted with the assessment that the market was in the process of bottoming and the capital flow was highly on speculative purposes.

The fund is selective when looking for potential stocks in the new cycle.

"Choosing the right industry and allocating to the right company with high beta (volatility) compared to the market helps generate outstanding returns," Loc said.

Nguyen Sang Loc, Associate Director, Portfolio Management at Dragon Capital. Photo courtesy of DCDE

Nguyen Sang Loc, Associate Director, Portfolio Management at Dragon Capital. Photo courtesy of DCDE

In addition, the fund will enlist stocks from companies that have a regular history of paying out dividends, or have the intention to pay dividends to pass on this amount to investors.

In 2024, the DCDE fund plans to maintain a flexible cash ratio based on phases because the market will have a divergence across sectors and stocks.

According to the company, sectors such as banking and retail are forecast to have stable profit growth and they will rise to lead the overall market in the near future.

Besides this, stocks in some sectors are suitable for investment trends this year, such as infrastructure and materials.

If this group qualifies all the fundamental factors of each business, including corporate governance and valuation, it can be selectively included in the investment portfolio.

go to top