Saudi Aramco's financials reveal large dividend paid to Saudi government despite lower profits in 2019
Today, Aramco held an investor relations call in which it briefly discussed its financials for the first half of 2019. Because Aramco is not a public company and has only one shareholder, it is not required to present any financial information to the public. Thus, the numbers released were sparse and revealed what many already knew — that Aramco is the most profitable company in the world today.
A Saudi Arabian Oil Co. logo sits on an electronic display at the company's corporate pavilion during the 22nd World Petroleum Congress in Istanbul, Turkey, on Wednesday, July 12, 2017. Oil fell from the lowest closing price in two weeks asfor H1 2019 was $46.9 billion. This is actually a 12% decrease from its net income for the first half of 2018, but was expected because the price of the Brent oil benchmark has averaged $66 per barrel this year as opposed to $69 per barrel last year.
Yet, the big questions concerning the strength of the company as a possible investment for outsiders remains unaddressed. Specifically, potential investors need to understand Aramco'swith the Saudi government. This was only addressed at one point during the call when an analyst asked about Aramco's dividend. According to figures provided by Aramco, the company paid $26.4 billion to its shareholder in"Ordinary Dividends" in H1 2019.
In answering the question, Aramco's CFO, Khalid al-Dabbagh, explained that Aramco's executives and board of directors policy regarding the Ordinary Dividend is based on three criteria: sustainability, affordability and a benchmark. According to al-Dabbagh, such a high dividend in 2019 was possible despite lower profits because Aramco made more than anticipated in 2018.
Even more important are the implications of this dividend should Aramco go public. For example, will this type of dividend be available to the holders of publicly traded shares or will the Saudi government be the only recipient of"Special Dividends" or even the"Ordinary Dividends" from Aramco? If Aramco makes its lucrative dividend available to shareholders other than the Saudi government, then Aramco shares could prove highly valuable.
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