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Saudi Aramco’s dividend boost may go a long way toward ensuring the government, its biggest shareholder, posts a fiscal surplus this year, even as other forms of oil income decline.
The world’s biggest crude company announced a $29.4 billion payout for investors on Monday when it posted second-quarter results. That was an increase of almost $10 billion from the first quarter and was due to the introduction of a “performance-linked” dividend that comes on top of the base quarterly payout of $19.5 billion.
The Saudi government was on course for a budget deficit for this year, running a shortfall of $2.2 billion in the first half as it cut crude production to try to bolster sagging prices.
The additional dividends will wipe out the deficit, according to Ziad Daoud, chief emerging-markets economist at Bloomberg Economics. He was forecasting a shortfall of about $9 billion for the full year before Aramco’s announcement.
The government is the main beneficiary of the dividends. It owns 90% of Aramco directly and another 8% through the sovereign wealth fund.
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