All eyes on Aramco as world’s top oil company set to alter dividend

Investors around the world are watching Saudi Aramco, which is scheduled to announce changes on Tuesday to the way its $124 billion annual dividend gets paid out.

Two scenarios are being considered as the kingdom tries to address its weakened finances, Bloomberg reports.

Aramco, the world’s biggest oil company, could continue some elevated payments and let its balance sheet take the increasing pain. On the other hand, it could cut distribution of the dividend and risk widening the Saudi budget deficit.

The company’s action would also affect debt issuances by Saudi Arabia, whose nearly $15 billion in bond sales this year make it the biggest borrower in emerging markets, the news agency said.

Crude sales and Aramco’s large annual payouts are central to funding Crown Prince Mohammed bin Salman’s Vision 2030 economic transformation plan. The level of the dividend’s distribution, however, has grown beyond the company’s earnings and dried up the $27 billion in net cash it had just over a year ago.

Aramco’s net income has declined year-on-year for seven consecutive quarters, and analysts are forecasting another drop in the fourth quarter. The company’s shares have declined 3% this year.