Aramco dividend vital to big-spending Saudi Arabia

By Matt Smith and Eva Levesque

March 3, 2025, 2:53 AM

The Hisma Desert, part of the Neom Nature Reserve, one of the Saudi giga-projects – state spending makes use of the Aramco dividends

$31bn Aramco dividend expected
Large portion of state spending
Share price down 14.5%

Saudi Aramco’s 2024 full-year results due this 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.

In January, the International Monetary Fund forecast Saudi Arabia’s economy would expand 3.3 percent in 2025, trimming its October prediction of 4.6 percent growth this year, as a result of oil production cuts.

Diminishing crude revenue has pushed Saudi Arabia to borrow more. Government debt hit a record SAR1.22 trillion in 2024, up 16 percent versus a year earlier and nearly a 10-fold increase since 2015, official data shows.

This has raised Saudi Arabia’s public debt-to-GDP ratio to 29.7 percent in 2024 from just 5.7 percent in 2015. This still remains far below most developed economies such as Japan (225 percent), the US (135 percent) and the UK (99 percent), S&P Global data shows.

Oil production averaged 9 million barrels of oil per day in 2024, Saudi Arabia’s lowest output since at least 2019 and is likely to remain at the same level in 2025 and 2026, ADCB estimates.

The bank also foresees crude prices averaging $72.50 per barrel this year and $70 in 2026 – down from $79.90 in 2024. This is further bad news for Aramco’s bottom line and the chances of the performance dividend continuing much longer.

“If Aramco lowers the [dividend] payout, coupled with the lowered [economic] growth forecasts, there’s a possibility the country will not be able to raise as much money from bonds as it could before, hindering its ability to finance projects,” says Valecha.

“In order to cover the deficit, [Saudi Arabia] would be forced to borrow more or even scale back on plans.”

Another solution would be to make a third stake sale in Aramco. The second, last year, raised about $12 billion for the government.

Yet halting the performance dividend will lessen Aramco’s dividend yield and its allure to potential investors. Aramco offers a dividend yield of 7.1 percent according to Simply Wall Street, which is comfortably higher than the oil majors of Europe and the US but below China’s big three oil companies and Brazil’s Petrobras.

Shares in Aramco, which will publish its full-year results on Tuesday, were down 14.5 percent in the 12 months to February 24.