This has been bugged forever, so I figured I'd inquire as to it being fixed yet. I've noticed no posts about it ever, and doubt anyone other than myself and friends have tested it. It uses stamina but has never reduced damage, ever. Anyway, figured I'd post it, since I didn't see any changes since I knew it was bugged last (2.11) Svar.
it doesn't reduce damage, it simply allows for the stamina bar to TAKE the dmg instead of the hlth bar, perhaps you are misinterpreting it? i've never tested it either so maybe you are correct about it but just thought i'd fill you in on it's intent.
Yes, I know it's intent, it drains stamina to use it as an akin to hitpoints, but it should reduce the actual damage you take (to your hp) by the stamina that it sucks up. Last I tested it, it takes the stamina, and the you lose the full amount of hp for the hit. I had at one point tested every gun for the damage they dealt, and with some friends sat around and tested every gun on both dug in and non dug in targets. The damage was exactly the same, the only difference was that a dug in target lost stamina *and* the same amount of health. So it was only a detriment. Svar