Saudi Aramco has no plans for now to increase its quarterly dividends of $18.7 billion even as other oil majors are increasing the yields to investors.
“We’ll advise later this year whether we’ll be sticking to the ordinary dividend or doing otherwise,” Ziad Al-Murshed, Aramco’s chief financial officer, told reporters on Sunday.
“We have a clear pecking order for our cash,” he said. “We start with sustaining capital, then move to paying the ordinary dividend.”
Aramco dividends’ yield is around 4 percent, lower than ExxonMobil at over 6 percent and Chevron that has 5.2 percent yield.
With Saudi Aramco’s results exceeding analysts’ expectations and its continuous investments in its operations, the company’s dividends yield is more sustainable than all the others, according to Al-Rajhi Capital’s Mazen Al-Sudairi.
Al-Sudairi, who is the head of research at investment arm of AlRajhi Bank, told Arab News that Saudi Aramco is the most sustainable dividend payer, as its investment today will help it pay more dividends in the future while everyone else is cutting back. He pointed out that Aramco did not cut the dividend in 2020 when oil prices were down and the market outlook was in a bad shape.
He, however, said, “we do not expect a growth in dividend since Aramco is spending relatively more (than other oil majors) in upstream and downstream projects.”
Raising debt was a tool for Aramco last year to pay dividends to the Saudi government, while using its own cash to pay for other shareholders, Al-Sudairi said, adding that this is acceptable knowing the relatively low debt ratio of the company and its strong cash position.
Aramco previously sold a sliver of its shares on the Saudi bourse in December 2019, generating $29.4 billion for 1.7 percent of its shares.
The company’s free cash flow last year totaled $6 billion, which is enough to cover dividends to shareholders other than the government for four years, said Al-Sudairi.
He also said concerns about Aramco’s ability to pay dividends are low compared to others.