Saudi Aramco’s 2024 full-year results due next week are likely to again underline the importance of the world’s largest listed oil company to big-spending Saudi Arabia’s economic development plans.
Aramco has said it expects to announce fourth-quarter dividends – payouts to the Saudi government are a core source of state revenue – of SAR116.5 billion ($31.1 billion), the same payout as the preceding three quarters.
That would boost its total dividends for 2024 to SAR466 billion ($124.3 billion) and equate to 34 percent of the SAR1.37 trillion of state spending last year, according to AGBI calculations. The kingdom’s annual deficit was SAR115.6 billion.
Aramco introduced an additional “performance-linked” dividend in 2023, which boosted payouts significantly; assuming fourth-quarter net profit is in line with that of the first nine months of 2024, Aramco’s dividend-to-profit ratio would be 110 percent. Or, put more simply, Aramco will pay more in dividends than it made in profit.
Why the increased windfalls for deteriorating performance? The government, which owns 81.5 percent of Aramco, needs the money. Likewise, the state-owned Public Investment Fund, which also holds a 16 percent stake and is a lead protagonist in the country’s economic diversification programme.
Declining oil revenue has done little to dent Saudi Arabia’s construction plans. A record $146 billion was awarded to projects last year, swelling the total value of under-development schemes to $421 billion according to a note by Abu Dhabi Commercial Bank.
Without Aramco’s performance-linked dividend Saudi Arabia’s deficit last year would have doubled to 6 percent of GDP, says Justin Alexander, a director at the consultancy Khalij Economics.
He and Vijay Valecha, chief investment officer at Dubai’s Century Financial, both anticipate Aramco scrapping the performance dividend, which the company said would run for six quarters from the third quarter of 2023 onwards.
“The budget for 2025 seems to assume slightly lower revenue than last year but still looks optimistic if [there’s] no performance dividend,” says Alexander.
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