Saudi blue-chips help Gulf dividends dwarf global average

August 13, 2024, 3:22 AM

Gulf companies returned an average dividend yield of 3.5% and the majority to declare returns for Q2 have been Saudi

16 Saudi companies revealed dividends
Gulf average yield is 3.5%
Commercial Bank of Kuwait at 7.4%

Saudi companies form the bulk of Gulf businesses that have announced second quarter dividends, but it is the Commercial Bank of Kuwait that provided the highest dividend yield. Saudi Aramco, Bahrain’s Batelco and Dubai’s Tecom Group are other standouts by this metric.

Of the listed Gulf companies with a market capitalisation of more than $1 billion, 23 have declared second quarter dividends so far. Some prefer to distribute only annual dividends, while others pay on a half-yearly or quarterly basis. A few do not pay dividends at all.

Commercial Bank of Kuwait has the highest dividend yield among the companies AGBI analysed, at 7.4 percent. It is followed by Aramco (6.8 percent), Batelco (6.3 percent), Dubai’s Tecom Group (5.7 percent) and Saudi Industrial Investment Group (5.4 percent).

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Of the 23 companies, 15 have a dividend yield above 4 percent.

Gulf equity markets trade at a dividend yield of about 3.5 percent, says Junaid Ansari, director of investment strategy and research at Kuwait’s Kamco Invest, noting this is higher than the MSCI World Index average of 2 percent and the 3 percent of the MSCI Emerging Markets Index, which includes many Gulf blue-chips.

US stocks, in contrast, provide an average dividend yield of about 1.5 percent, Ansari says.

Of the 23 companies that have announced second-quarter dividends and are included in AGBI’s analysis, 16 are from Saudi Arabia, which reflects a tendency among the kingdom’s corporations to announce their financial results earlier than those in other Gulf countries.

Three are Kuwaiti, two are from the UAE, one is Bahraini and one Qatari. Of these, two are banks, four are telecom operators and one is in real estate.

“GCC investors include both income-seeking investors as well as long term investors,” says Ansari. “This would surely attract investors to high dividend paying stocks.”

Saudi petrochemical companies pay quarterly dividends despite the sector suffering from historically low margins because of higher costs and subdued demand.

Saudi Basic Industries Corp (Sabic), the kingdom’s top petrochemical company and its largest listed company until Aramco went public, will pay a quarterly dividend of $1.70 per share, Kamco Invest calculates based on Bloomberg data.

Telecoms companies are a favourite among investors who prioritise dividends over potential share price gains. The sector’s earnings – in the Gulf at least – remain steady and predictable regardless of the broader economy.

Of the operators that have announced a second quarter dividend, Saudi Telecom Co’s current share price gives it a dividend yield of 4.2 percent. Doha-headquartered Ooredoo’s is 5.3 percent and Abu Dhabi-based e& – commonly known as Etisalat – has a 4.8 percent yield. This trio, along with Batelco, are former monopolies in their respective countries.

Total return considers both dividend payments and the performance of the company’s share price. In the year to date, Saudi Arabia’s Retal Urban Development has provided the biggest total return among companies analysed at 50.6 percent.

Yet 11 companies have a negative total return. These include Saudi trio Aramco (-15.1 percent), Sabic (-7.3 percent) and Yanbu Cement (-28.4 percent).

Aramco, the world’s biggest oil major, will pay a quarterly base dividend of $20.3 billion plus a further performance-linked dividend of $10.8 billion.

The company says it expects to distribute dividends for 2024 totalling $124.2 billion. Saudi Arabia’s government and the state-run Public Investment Fund together own about 97.5 percent of Aramco, so these payouts will provide a welcome boost to public coffers.