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Bloomberg

Saudi Firms to Cut Dividends For Prince’s $1.3 Trillion Plan

(Bloomberg) — Saudi Arabia’s biggest listed companies, including energy giant Aramco, will reduce their dividends and redirect the money to the local economy as the crown prince tries to get his economic overhaul plan back on track.Minority shareholders of Aramco — the world’s biggest oil company and 98% owned by the kingdom — will still get dividends, Mohammed bin Salman, the kingdom’s de facto leader, said. Investors in other firms will profit because stock prices will rise as the extra investment boosts the economy, he said.Twenty-four firms such as Saudi Basic Industries Corp., Almarai Co., Saudi Telecom Co. and National Shipping Co. have agreed to join the plan, contributing 5 trillion riyals ($1.33 trillion) of domestic capital spending over the next 10 years, he said.The new plan comes after last year’s coronavirus pandemic and oil market turmoil created a double crisis for Saudi Arabia, setting back the 35-year-old’s goals to boost the non-oil economy and slash unemployment.The companies will benefit from extra subsidies and the ability to lobby for law changes, the prince said. The Saudi stock market was up 1.5% at 10.43 a.m. in Riyadh, while Aramco shares gained 1.4%.“What we’re trying to create is growth in Saudi Arabia: growth in GDP, more jobs in Saudi Arabia, more income to the Saudi government and a better life for Saudis,” Prince Mohammed said Tuesday during a night-time briefing with journalists in Riyadh. “That will not harm the shareholders of those companies because instead of getting dividends in cash, you’re going to get growth in the stock market.”Radical TransformationCutting dividends for reinvestment purposes is not necessarily negative news for investors in Saudi markets, according to Hedi Ben Mlouka, chief executive officer at FIM Partners in Dubai.“You’ll lose on the dividend yield but you’ll gain on growth momentum,” he said to Bloomberg Television on Wednesday. “That’s the way any long-term investor should look at it. This is a country going through transformation. You need to accept change like this that is radical.”The 5 trillion riyals from private firms is part of a 27 trillion-riyal investment strategy Prince Mohammed outlined for the next 10 years. Central government spending will account for around 10 trillion riyals, while the sovereign wealth fund previously announced that it plans to invest 3 trillion riyals on top of that.Read more: Saudi Jobs for Saudis Is Crown Prince’s Generational ChallengeAnother 4 trillion riyals will come from private investments, while the final 5 trillion riyals will come from ordinary consumer spending.Diversify the EconomyThe announcement underlined the extent to which the prince’s focus is turning domestic as he tries to diversify the economy of the world’s largest oil exporter and create enough jobs for the kingdom’s youthful population. It also showed…