Annual returns are among the most important concepts sought by investors in the Saudi financial market, whether they are individuals or institutions. The term annual returns refers to the total profit achieved during one financial year, including both capital gains from rising stock prices and cash distributions paid by companies to shareholders. In the Saudi financial market, annual returns are characterized by several features, including the absence of taxes on profits for individuals, high liquidity, and a variety of investment products ranging from stocks to funds and fixed-income instruments.
Annual returns are calculated using specific formulas that combine the beginning and end prices of the year with distributions, reflecting the overall performance of the investment. In recent years, the Saudi financial market has shown competitive annual return rates compared to neighboring markets, supported by the results of leading companies and their generous distributions, especially in the energy, banking, and telecommunications sectors. This article provides a detailed explanation of annual returns, methods of calculation, influencing factors, practical examples from companies like Aramco, the latest sector indicators, and recent developments for 2024 and 2025.
It is important to note that the information provided here is for educational purposes only and is not investment advice. It is always advisable to consult a licensed financial advisor before making any investment decisions.
Definition of Annual Returns and Their Importance in the Saudi Stock Market
Annual returns are the percentage of profit or loss achieved on the invested capital during one financial year. In the Saudi financial market, annual returns are a key benchmark for evaluating investment performance in stocks and investment funds. The importance of the annual return lies in its ability to combine changes in stock prices (capital gains) along with cash distributions (dividends), allowing investors to have a comprehensive view of the investment's viability.
Annual returns are used to compare companies or funds to choose the most suitable ones based on financial goals, and they help measure performance against fixed-income alternatives such as sukuk and bonds. In Saudi Arabia, annual returns are an indicator of market strength and stock liquidity, as major companies like Aramco and SABIC often tend to distribute generous dividends that enhance the annual return value for shareholders.
The importance of annual returns is also increasing in light of the absence of taxes on capital gains and distributions for individuals, making the declared return the same as the net return obtained from the investment, unlike many global markets where these profits are subject to taxes.
Components of Annual Returns: Capital Growth and Cash Distributions
The annual return on investment consists of two main components:
1. Capital Growth: This is the increase in the value of the stock or investment unit between the beginning and end of the financial year. If an investor buys a share at 50 SAR and it rises to 60 SAR by the end of the year, the capital growth is 10 SAR per share.
2. Cash Distributions: These are the cash profits distributed by the company to its shareholders during the year. For example, if the company distributes 2 SAR per share annually, this is added to the total return.
Total annual return = (End of year price – Beginning of year price + Distributions) ÷ Beginning of year price × 100%.
In the Saudi market, cash distributions are a pivotal part of the annual return, especially since many companies adopt a policy of regular dividend distribution. Some sectors, such as energy and telecommunications, are known for high distributions, while growth sectors (like technology) focus on reinvesting profits rather than distributing them. Understanding the components of annual return helps investors assess the risks and expected returns from each sector or stock.
Calculating Annual Returns in the Saudi Financial Market
To calculate the annual return on an investment in a stock or fund listed on the Saudi financial market, the following formula is used:
Annual return = ((Investment value at the end of the year – Investment value at the beginning of the year + Distributions received during the year) ÷ Investment value at the beginning of the year) × 100%
Practical example:
- Beginning of the year: Stock price = 100 SAR
- End of the year: Stock price = 120 SAR
- Cash distributions during the year = 5 SAR per share
- Annual return = ((120 – 100 + 5) ÷ 100) × 100% = 25%
In the Saudi market, price and distribution data can be obtained from the official Tadawul website or from quarterly company reports. This information is often published in the investor relations section of each company or through specialized platforms like Argaam. It is important to use accurate data for a full year and to consider any exceptional distributions or stock splits that occurred during the year.
The Role of Cash Distributions in Enhancing Annual Returns in the Saudi Market
Cash distributions are one of the most important components of annual returns in the Saudi stock market, especially given the local companies' culture that tends to distribute large percentages of profits to shareholders. Local regulations require allocating 10% of net profit annually to the legal reserve, after which the remaining profits are distributed according to the board's policy and the general assembly's approval.
In 2024, the average cash distribution yield for stocks in the Saudi market ranged between 3% and 5% annually, with companies in the energy and utilities sectors offering higher rates (up to 7-8%). Regular distributions provide investors with periodic cash flows that reduce price volatility risks and enhance the financial stability of the portfolio.
On the other hand, cash distributions in Saudi Arabia are exempt from taxes for individuals, making their net value higher compared to other markets. Therefore, many investors tend to prefer stocks with high distributions when building their investment portfolios.
Impact of Market Growth and Indicators on Annual Returns
The growth of the Saudi financial market, as reflected in the performance of key indicators such as the TASI index, has a direct impact on the annual returns for investors. Between 2023 and 2025, the TASI index recorded an increase of about 18%, supported by the results of leading sectors, which positively reflected on the overall annual return rate for investment portfolios linked to market indicators.
Growth in the general index means that most listed stocks have seen an increase in their prices, and thus investors have achieved capital gains alongside distributions. Some exchange-traded funds (ETFs) that track the general index or sector indices have recorded annual compounded returns between 8% and 12% in recent years.
However, it is essential to recognize that index movements do not always reflect the performance of all stocks equally; some sectors or companies may outperform the index, while others may lag. Therefore, investors prefer to monitor the performance of sector indices, such as the energy or banking sector index, for a more accurate comparison of annual returns.
Annual Returns in Saudi Investment Funds
Investment funds are preferred tools for achieving competitive annual returns in the Saudi market. These funds include open-end funds, exchange-traded funds (ETFs), and equity and sukuk funds. According to data from the Capital Market Authority for 2024, the assets of Saudi investment funds reached approximately 360 billion SAR, with annual compounded returns ranging between 8% and 12% over the past years.
The annual returns in funds depend on each fund's strategy; active funds may achieve higher returns than the index, while exchange-traded funds often adhere to the performance of the underlying index. One of the advantages of investment funds is that they allow investors to diversify their portfolios, reducing the risks associated with the volatility of a single stock. Funds also provide periodic reports on annual performance, making it easier for investors to track achieved returns.
It is advisable to review each fund's prospectus to understand the details of returns and fees, while it is important to understand that past performance does not guarantee similar returns in the future.
Impact of Interest Rates and Monetary Policy on Annual Returns
Interest rates and the monetary policy of the Saudi Central Bank (SAMA) directly and indirectly affect the annual returns of financial assets in the Saudi market. In 2024-2025, the market witnessed a gradual increase in interest rates aimed at containing global inflation. This led to an increased attractiveness of fixed-income instruments such as sukuk and government bonds, where the yield on 5-year treasury sukuk rose from 4.5% to 5.5% during the year.
Rising interest rates typically exert pressure on stock prices, especially for companies with high debt or interest-sensitive sectors such as real estate. Conversely, banks benefit from rising interest rates through the growth of net interest margins, which reflects positively on their annual returns. Therefore, it is important for investors to monitor monetary policy trends and understand how they affect annual returns across various investment instruments.
Additionally, the rise in sukuk yields may drive some investors to shift part of their investments from stocks to fixed-income instruments, especially if bond yields approach or exceed stock yields.
Practical Examples: Annual Returns of Saudi Aramco
Saudi Aramco (Symbol 2222) is a prominent example for understanding annual returns in the Saudi market. Aramco is one of the largest publicly listed companies globally by market capitalization, known for its high liquidity and generous distributions.
- Stock price: approximately 36 SAR in mid-2025
- Market capitalization: 7.5 trillion SAR
- Cash distribution yield: average 7-8% annually
- Price-to-earnings ratio (P/E): between 8 and 9 times
- Revenue growth: approximately 10% in 2024
During 2024, Aramco distributed cash dividends amounting to 288 billion SAR annually, or about 3.4 SAR per share every three months. If we add to this the increase in the stock from 33 to 36 SAR, the total annual return exceeds 10% when accounting for distributions and capital growth. Despite a decline in net profits during some periods due to falling oil prices, the company's policy of maintaining high distributions has enhanced the annual return for shareholders.
This example reflects the importance of selecting companies with high liquidity and stable distribution policies when seeking to achieve rewarding annual returns.
Highest Yielding Sectors in the Saudi Financial Market
Annual return rates vary among sectors in the Saudi market depending on the nature of the businesses and their profit distribution policies. Historically, the energy sector (oil and gas) and petrochemicals lead the list of highest-yielding sectors, supported by rising oil prices and the generous distribution policies of major companies like Aramco and SABIC.
The telecommunications sector (such as STC) features relatively stable annual returns, often between 4% and 5%, thanks to stable revenues and regular distributions. The banking sector also offers good annual returns, especially during periods of rising interest rates, with returns ranging between 2% and 4% in recent years.
Meanwhile, the utilities sector sometimes provides high returns, especially electricity and water companies. Growth sectors like technology and healthcare tend to reinvest profits, which reflects more in capital growth than in cash distributions. Therefore, an investor's strategy varies based on their preference between immediate returns and long-term growth.
Impact of Regulatory and Tax Environment on Annual Returns
The regulatory environment in the Saudi financial market is a supportive factor for annual returns, especially since the government does not impose taxes on capital gains or cash distributions for individual investors. This enhances the net return obtained compared to markets that impose high taxes on these returns.
Local regulations require companies to allocate a portion of profits to the legal reserve, followed by distributing the remaining profits according to the general assembly's approval. The Capital Market Authority also encourages transparency and regular disclosure of company results, allowing investors to accurately track annual returns.
The absence of taxes, along with stringent disclosure and governance regulations, is one of the main advantages of the Saudi market. Additionally, liquidity support measures such as improving the market's inclusion in global indices (MSCI and FTSE) have contributed to the influx of foreign investments, enhancing trading volume and actual annual returns for investors.
Risks Associated with Achieving Annual Returns in the Stock Market
Although the Saudi financial market is considered one of the most liquid and stable regional markets, achieving annual returns always involves some risks. The most prominent of these risks include:
1. Stock price volatility: Stock prices may change rapidly due to market news or changes in the global economy.
2. Sector risks: Some sectors are more susceptible to volatility, such as energy, which is affected by global oil prices.
3. Company risks: Poor operational performance or management changes may impact distributions and stock value.
4. Liquidity risks: Despite generally high liquidity, some less-traded stocks may be difficult to sell when needed.
5. Macroeconomic risks: Inflation, interest rates, and political changes may affect market performance and annual returns.
Diversification across stocks and sectors, monitoring financial news, and utilizing quarterly company reports are essential tools for reducing risks and achieving stable annual returns.
Analyzing Annual Returns of a Diversified Investment Portfolio
Investors in the Saudi financial market are advised to distribute their investments across various instruments and sectors to achieve a balanced annual return and reduce risks. To calculate the annual return of a diversified portfolio:
1. Calculate the annual return for each asset (stock, fund, sukuk) using the annual return formula.
2. Multiply the annual return of each asset by its relative weight within the portfolio.
3. Sum the results to obtain the total annual return of the portfolio.
Example: If you have a portfolio consisting of 50% stocks, 30% investment funds, and 20% sukuk:
- Stock return = 12%
- Fund return = 9%
- Sukuk return = 5.5%
Total return = (0.5 × 12) + (0.3 × 9) + (0.2 × 5.5) = 9.05%
This method allows for benefiting from market fluctuations and dividend distributions while reducing the impact of risks associated with any single asset.
Recent Developments and Their Impact on Annual Returns in 2024-2025
The Saudi financial market witnessed several developments in 2024-2025 that affected annual returns for investors:
- Rising oil prices to levels close to 100 USD per barrel at the beginning of 2024 boosted the profits of energy companies and increased the returns of leading stocks.
- Government initiatives to support the domestic economy enhanced demand for energy and petrochemical products, positively reflecting on the results and profits of major companies.
- The increase in interest rates by SAMA led to greater attractiveness of sukuk and bonds, helping banks improve their annual returns.
- The inclusion of the Saudi market in global indices (MSCI and FTSE) resulted in an influx of foreign investments and increased liquidity, supporting the rise of indices and returns.
- The announcement of some major companies regarding increased cash distributions or share buyback programs provided additional returns for investors.
- Global developments such as changes in U.S. interest rates and geopolitical tensions temporarily affected the market and its annual returns.
All these factors combined have made annual returns in the Saudi market among the highest regionally, with the necessity to continuously monitor developments and their impact on the performance of each sector and company.
How to Accurately Monitor and Measure Annual Returns
Monitoring annual returns requires the use of reliable data sources and regular updates. In the Saudi market, investors can track annual returns through:
- The official Tadawul website: Provides historical data on stock prices and cash distributions for each company.
- Quarterly and annual company reports: Include data on net profit, distributions, and revenue growth.
- Specialized analytical platforms such as Argaam or Investing Saudi Arabia, which present annual analyses and sector comparisons.
- Financial brokerage applications: Allow for monitoring the portfolio and calculating the annual return accurately and automatically.
It is also important to review the results of key indices (TASI, sector indices) and consult the Capital Market Authority's reports on the performance of funds and stocks.
To ensure measurement accuracy, the annual return should be calculated based on a full 12-month period, including any exceptional distributions or stock splits when they occur. It is also recommended to compare the annual return with inflation and interest rates to assess the real return of the portfolio.
Conclusion
Annual returns represent a fundamental benchmark for measuring the viability of investments in the Saudi financial market, whether investing in stocks, funds, or fixed-income instruments. The Saudi market stands out as an attractive destination for investors due to its high liquidity, generous distributions, absence of taxes on profits for individuals, and supportive regulatory policies. However, achieving annual returns is subject to the influence of several factors, including market volatility, interest rates, company results, and local and global economic developments.
It is essential for investors to rely on official data and reliable analyses when measuring annual returns, while considering diversification across sectors and investment instruments to mitigate risks. It is always advisable not to rely solely on historical annual returns when making investment decisions, but to review the strategy of the company or fund and to regularly monitor economic and financial news.
The SIGMIX platform emphasizes the importance of consulting a licensed financial advisor before making any investment decisions to ensure that investments align with financial goals and the acceptable risk level for each investor.
Frequently Asked Questions
Annual returns represent the percentage of profit or loss achieved on the invested capital during one year. In the Saudi market, the annual return is calculated by adding the change in stock price to the cash distributions during the year, then dividing the result by the purchase price at the beginning of the year and multiplying by 100%. This method provides an accurate picture of the annual performance of the investment.
Distribution yield represents the annual cash profits distributed per share to its current price, without accounting for changes in stock price. In contrast, the annual return includes the distribution yield plus any increase or decrease in stock price during the year. Thus, the annual return is a more comprehensive indicator of investment performance.
You can find out the annual return of any listed company by checking the company's page on the official Tadawul website or through its annual and quarterly reports. The annual return is calculated by adding the change in stock price during the year to the cash distributions, and dividing the result by the beginning of the year price. Platforms like Argaam provide ready and detailed data on company performance.
No, dividends for individual investors in the Saudi financial market are exempt from taxes, according to current financial policy. This enhances the net return that the investor receives, making it higher than some markets that impose taxes on capital gains or distributions.
The energy sector, particularly oil and petrochemical companies like Aramco and SABIC, leads the sectors in terms of annual returns due to their generous distributions and performance during periods of rising oil prices. The telecommunications and banking sectors also provide good annual returns due to regular dividend distributions and revenue growth.
Rising interest rates often lead to increased attractiveness of sukuk and bonds, as their annual yields rise. Conversely, stock prices may be negatively affected, especially for companies with high debt. Banks typically benefit from rising interest rates by increasing their profits, which positively reflects on their annual returns.
The annual return of a diversified portfolio is measured by calculating the individual return for each asset (stock, fund, sukuk), then multiplying it by its relative weight within the portfolio, and finally summing the results to obtain the total annual return. Many brokerage applications provide tools to automatically calculate the annual or compounded performance of the portfolio.
The main risks include stock price volatility, changes in local and global economic conditions, company performance, fluctuations in oil prices, changes in interest rates, and liquidity risks for some stocks or investment instruments. Diversification and monitoring periodic reports can reduce the impact of these risks on annual returns.
The inclusion of the Saudi market in global indices like MSCI and FTSE has led to an influx of foreign investments and increased liquidity, which has enhanced the performance of indices and raised the annual returns of leading stocks. It has also contributed to improving transparency and raising governance and disclosure standards in the market.
Historical annual returns provide an indicator of the performance of companies or funds in the past, but they do not guarantee achieving the same returns in the future. Market and economic conditions change continuously, so investors should review strategies and monitor periodic financial reports to make informed decisions.