Here I have suggested a few stocks in Vietnam where I believe a year or two from now will deliver consistent, relatively high, growing dividends well into the future. They are not simply choices that come up by scanning for the large companies that have higher historical dividend yields. Rather than look backwards, I am looking at a very long-term outlook of likely free cash flows and balance sheet strength.
I have diversification in mind in terms of the three I mention here, but obviously this would only be a small start and you would include a lot more names in a dividend portfolio. Read on to see a few of the names I might consider to start examining.
These are some of the broad points in the back of my mind when thinking about some possibilities as solid, long-term dividend stocks in Vietnam. Hopefully stocks that you don’t have to think about selling.
I discussed these points in more detail in my last blog post here
Can you retire off Vietnam dividend stocks?
Just to summarise though these were elements I was looking for.
HOW TO BUILD A PORTFOLIO OF VIETNAM DIVIDEND STOCKS FOR PASSIVE INCOME
- Look at likely future dividends, avoid over reliance on historical data.
- Be well diversified in terms of sectors.
- Stick to larger companies with solid balance sheets.
- Look for conservative dividend payout ratios.
- Favour companies with pricing power.
- Plan a buffer for potential dividend cuts.
- Consider factors such as FX and taxes.
How about these options below as potentially a few dividend stocks in Vietnam to consider? Let me know in the comments area your thoughts.
3 dividend stocks to buy in vietnam in 2021?
- FPT Corporation (HOSE:FPT)
- Hoa Phat Group JSC (HOSE:HPG)
- VinaCapital Vietnam Opportunity Fund Ltd (LSE:VOF)
Is FPT Corporation (HOSE:FPT) a buy?
FPT Corporation is the largest IT company in Vietnam. Their core segments span technology and telecommunications, and to a lesser extent education. Their history is over 30 years and in 2006 were the first IT company listed on the stock exchange in Vietnam. Strong EPS and cashflow growth is expected over the years ahead as they benefit from a wide variety of tailwinds. The growth in digital transformation services will see margins improve at already strong levels. The telecommunications segment is underpinned by increasing demand for internet usage whether that be from households or corporates. Demand for IT education is also experiencing strong growth as is remote learning in general.
FPT Corporation PE ratio (historical FY20)
24 times (approx. September 2021).
FPT Corporation dividend yield (historical FY20)
2% (approx. September 2021).
FPT Corporation PE ratio estimated FY2022
Forecast 16 times (approx. September 2021).
FPT Corporation future dividend yield 2023?
Forecast 2.4% (approx. September 2021).
FPT Corporation my comments:
Whilst normally you might expect someone suggesting dividend stocks for a portfolio would be searching for yields of circa 4%, FPT Corporation warrants consideration due to the very long-term growth potential.
FPT has been delivering a steady dividend, albeit not that high, for awhile and this will continue over the next few years. The sustainability though is excellent as the dividend payout ratio will be quite low in a couple of years as cash flow from operating activities likely experience rapid growth.
I wouldn’t be surprised if my yield estimates above are too conservative and FPT Corporation lift the dividend payout ratio. It will be hard for others to compete with FPT given it’s already large scale and position they have established.
Is Hoa Phat Group JSC (HOSE:HPG) a buy?
Hoa Phat Group is the leading industrial manufacturing group in Vietnam. Over 80% of revenues relate to steel production, where they have a large market share of above 30%, with aims to get to 40%. Their agricultural business segment is also experiencing high growth rates. They have generally traded on a single digit PE ratio, and are well positioned for Vietnam’s strong focus on infrastructure development.
Hoa Phat PE ratio (historical FY20)
9 times (approx. September 2021).
Hoa Phat dividend yield (historical FY20)
Historically Hoa Phat generally hasn’t paid dividends but this is projected to change.
Hoa Phat PE ratio estimated FY2022
Forecast 8 times (approx. September 2021).
Hoa Phat future dividend yield 2023?
Forecast 4.2% (approx. September 2021).
Hoa Phat Group my comments:
This is an unusual dividend stock to nominate because historically the company has not been paying dividends until the plans changed in 2020. Their dominant market share, scale, and position to cater for the Vietnam government’s strong appetite for infrastructure development put it an ideal place. Additional capacity is quickly coming online, assisting the company’s cash flows to ramp up over the next couple of years. This paves the way for Hoa Phat to become a solid high dividend paying stock by 2023.
I spend my time in Vietnam’s south and Ho Chi Minh City and can certainly relate for the need of big infrastructure projects such as another international airport, more highways and efficient rail networks etc. This sort of need won’t go away anytime soon.
Is VinaCapital Vietnam Opportunity Fund Ltd (LSE:VOF) a buy?
Vina Capital Vietnam Opportunity Fund is the closed end fund vehicle of one of the largest and longest established fund managers in Vietnam. It invests across a broad range of industry sectors and asset classes and had a strong track record outperforming the VN-index. It usually has traded at a discount to its Net Asset Value (NAV).
Vietnam Opportunity Fund discount to NAV
17.7% (at July 31, 2021)
Vietnam Opportunity Fund dividend policy
On 17 August 2017, the Company announced a change in its dividend policy and declared its first dividend. The Board now intends that the Company will pay a dividend representing approximately 1% of NAV twice each year, normally declared in April and October.
Vietnam Opportunity Fund future dividend yield 2023?
The dividend policy above infers a yield of 2%. If you manage to buy the shares at the discount highlighted above, the yield is effectively almost 2.5%.
This has potential to improve to 3% plus over time around 2023.
Vietnam Opportunity Fund my comments:
BEST CLOSED END FUNDS FOR INCOME?
With their largest holding of Hoa Phat Group likely to be increasing their dividends in the years ahead, VOF has room to potentially strengthen this dividend policy. Other portfolio holdings may well also look to increasing dividends as the economy grows strongly. Given the shares have still recently stayed at a stubbornly wide discount to NAV, they should be tempted towards a higher dividend payout policy as one way to help bridge the gap. Another continuation vote for the company is scheduled for December 2023 so perhaps that will be a catalyst for a tilt. Due to this backdrop, despite the historical yield on VOF not looking that high, the stock might well surprisingly be a potentially yield play. One that effectively yields even above 3%, that is very reliable, and can grow with any long-term growth in the NAV.
VOF as a closed end fund gives you good diversification compared with relying on the dividend yield from one single stock.
As usual thoughts welcome! Will these 3 stocks deliver consistent longer term dividends?
Is Vietnam a good investment?
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