Pumping Up Profits

Pumping Up Profits

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  • Saudi Aramco, the major oil company, declared a decline of 19% in its first-quarter profits, with net income dropping from $39.5 billion to $31.9 billion due to the reduction in oil prices. To counterbalance the impact of lower oil prices on Saudi Arabia's budget, Aramco intends to increase its dividend, which could raise payments for both investors and the government by over $10 billion.
  • Aramco's net profit increased 3.75% from the fourth quarter, despite weaker earnings. Lower taxes and higher income compensated for this. The company's shares rose 3.2% in early trading in Riyadh. Aramco's first-quarter dividend of $19.5 billion, raised in Q4, will be paid in Q2. Quarterly cash flow from operating activities and free cash flow both increased slightly compared to the previous year.

Why it matters

The biggest oil exporter globally, announced that it would introduce a performance-based dividend alongside the existing $19.5 billion payout. The new dividend will be calculated as a percentage of the company's free cash flow, with a target range of 50% to 70%. Aramco's board will have complete discretion over the quarterly payments, which will be contingent on the company's performance.


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