Saudi Aramco’s Dividend Strategy Could Be Set For Shift as Share Price Returns To Listing Level

As the share price of Saudi Aramco (2222.SR) trades remarkably close to it's opening day value of 27.56, having fallen 13.77% over the past 12 months, a potential shift in strategy could be set to come into play.

The world's largest oil company is anticipated to make significant changes to its dividend strategy for 2025 according to analysis by JPMorgan, with Aramco said to be unlikely to offer performance-linked dividends in the coming year. This forecast follows an extended period of substantial payouts by the oil giant, marking a pivotal potential shift in its financial strategy.

In 2024, Saudi Aramco plans significant dividend distributions amounting to $124.3 billion, of which $43.1 billion is designated as performance-linked payouts. This approach highlights the importance of these dividends to Saudi Arabia's economy, considering that the Saudi government owns approximately 81.5% of Aramco. Moreover, the Public Investment Fund, which holds an additional 16% stake, utilises these dividends to support the nation's diversification efforts. The strategic aim is to lessen the dependency on oil revenues, thereby leveraging the profits from Aramco to invest in various non-oil sectors and enhance economic stability.

The dividends from Saudi Aramco are critical for supporting the government's broader economic goals. With plans to reduce the country's reliance on oil, the revenues generated from Aramco dividends are being strategically invested into projects aimed at diversifying the economy. In alignment with these efforts, the Saudi government successfully raised over $12 billion through share sales of Aramco last year. Such actions underscore the dual focus on short-term financial returns and long-term economic transformation.

Market investors are thus advised to recalibrate their expectations for Aramco's dividend plans in 2025, in light of JPMorgan's analysis. The absence of performance-linked payouts could influence dividend-related earnings forecasts and subsequent investment strategies. As Aramco's dividends play such a crucial role in Saudi Arabia's fiscal planning, any changes to dividend policies are likely to have significant implications both domestically and for global investors.