Due to the inconclusive relationship between dividend policy and firm value from both theoretical and empirical studies, this paper aims to examine the impact of dividend policy on firm value as well as the moderating role of liquidity on this relationship among listed companies in Vietnam. Using panel data of 52 construction and building material companies listed on the Ho Chi Minh Stock Exchange in Vietnam during 2018–2023, the paper demonstrates the negative impact of dividend decisions. An increase in dividend yield reduces the firm value, however, this negative impact is less severe for highly liquid firms. Firms with high liquidity ratios not only can fulfill their short-term obligations quickly but are also well-positioned to afford investments for growth. Therefore, an increase in dividend decisions in these firms doesn’t mean cutting money for investment, thus creating the moderating role of liquidity on this relationship. The results of this study provide insight for managers when making dividend decisions: dividends should be considered only after fulfilling the demand for operational activities as well as investment for growth. Managers can consider share repurchase which is popular these days for its flexibility and other advantages.