Currency Distribution: Everything You Need to Know About Dividends in the Saudi

The term 'currency distribution' is often used in the Saudi financial market to refer to the process of distributing cash dividends determined by listed companies and distributed to their shareholders in proportion to their ownership in the capital. Although the term may seem ambiguous to some, its content is closely related to the concept of dividend payout. In the Saudi market, it is required that the proposal for dividend distribution be made by the company's board of directors and then presented to the general assembly for final approval. After that, the entitlement date (the date on which the names of eligible shareholders for distribution are fixed) and the dividend payment date are determined, and the amounts due are transferred to the trading accounts of each shareholder. This process is supervised by the Saudi Capital Market Authority, which requires companies to disclose distributions and relevant key dates in advance. Dividend distribution is considered one of the important indicators of a company's financial solvency and stability, and is viewed by investors as a source of continuous income, especially in companies with regular and stable distributions such as some companies in the industrial and cement sector.

The process of distributing cash dividends begins with a decision from the board of directors of the listed company, which recommends distributing a certain percentage of the net profits achieved during a specific financial period (annual or quarterly). The recommendation is then presented to the ordinary general assembly of shareholders for approval. If approved, the company announces through the Saudi financial market (Tadawul) the distribution details, including: the amount of distribution per share, the entitlement date (the last day for new shareholders to claim the distribution), and the actual payment date.

Once the entitlement date is reached, the rights of the shareholders registered in the company's records on that day to receive dividends are established. On the payment date, the company transfers the amounts due directly to the bank accounts or trading wallets of the shareholders, without requiring any additional action from them. Saudi regulations require companies to fully disclose all these details well in advance of the distribution, enhancing transparency and trust in the financial market.

The process of distributing dividends in the Saudi market is subject to strict regulations from the Capital Market Authority aimed at protecting shareholders and ensuring transparency. The most prominent of these regulations include:
1. No listed company can distribute more than 100% of its annual profits, even if it has cash reserves.
2. The board's decision to recommend must be sent to the authority before the general assembly convenes, disclosing all details related to the distribution amount and its dates.
3. It is required to announce two key dates: the 'Ex-Date', which is the last day purchases of shares are eligible for distribution, and the actual 'Distribution Date' of the dividends.
4. Companies must execute the distribution on time and deposit the amounts into shareholders' accounts without delay; otherwise, they may face regulatory fines or corrective actions.
5. Promising or forecasting future distributions before they are officially approved is prohibited.

These regulations enhance the credibility of the Saudi stock market and protect the rights of all parties involved.

One important aspect of currency distribution is determining the intervals between the announcement of the distribution and the actual payment date. The company announces the entitlement date (Record Date), which is the day on which eligible shareholders to receive dividends are determined. It also announces the 'Ex-Date', which is the day when the stock begins trading without entitlement to the declared dividends.

After the general assembly announces approval of the distribution, there is usually a gap period (ranging from a week to a month) until the amounts are transferred to shareholders' accounts. These procedures ensure fairness among shareholders and prevent those who buy the stock after the entitlement right from benefiting from the scheduled distribution. The Capital Market Authority closely monitors these dates to ensure companies comply and avoid any entitlement conflicts.

Hail Cement Company (symbol: 3001) is a real-world example of the application of the dividend distribution system in the Saudi financial market. In recent years, the company announced cash dividends to its shareholders, such as a distribution of 0.50 SAR per share for the year 2021, which was approximately 4.3% of the stock price at that time. The company has not announced new distributions until mid-2024, awaiting the results of the general assembly to approve distributions for the previous year.

The distribution of dividends in the company is based on actual profits, financial performance stability, and the board's recommendation. Hail Cement Company is committed to disclosing all distribution details through official announcements on the Tadawul website. The entitlement and payment dates are clearly defined, allowing shareholders to know their due dates and accurately track financial transfers. This approach enhances investor confidence in the company and the sector in general.

For more details on the current performance of Hail Cement's stock, you can follow the stock page at the link: [/stocks/3001/].

Several financial indicators help understand a company's ability to distribute dividends and the sustainability of that distribution, the most important of which are:

1. Earnings Per Share (EPS): Measures annual net profit divided by the number of shares, and is a direct indicator of the company's ability to generate distributable profits.
2. Payout Ratio: Represents the ratio of distributed earnings to net profits achieved. A high payout ratio may indicate a generous distribution policy, while a low ratio may reflect the company's desire to retain earnings to finance future projects.
3. Price-to-Earnings Ratio (P/E Ratio): Measures the relationship between the stock price and the company's annual earnings. A moderate P/E ratio often indicates a balance between the stock price and the company's profitability, while a high ratio may indicate expectations of future growth.
4. Dividend Yield: Represents the ratio of cash distributions to the current stock price and is considered an indicator of expected income from investing in the stock.

For Hail Cement Company, the P/E ratio in mid-2024 was about 18-20 times, and the yield on the 2021 distributions was about 4.3% of the stock price at that time.

The Saudi cement sector is a strategic sector that plays a pivotal role in economic development and infrastructure projects. The sector includes major companies such as Saudi Cement, Qassim Cement, and Yamama Cement, along with medium and small companies like Hail Cement (3001). The sector's performance is influenced by several key factors, including:

- Growing domestic demand due to major housing and infrastructure projects (NEOM, Red Sea, Qiddiya, etc.).
- Fluctuations in energy prices, which represent a significant portion of production costs.
- Intense competition among companies, which makes profit margins susceptible to pressure if supply exceeds demand.

In 2024 and 2025, the sector witnessed an increase in selling prices and an improvement in the margins of some large companies, while some smaller companies continued to face challenges related to cost pressures and limited expansion. Companies like Hail Cement benefit from their geographical location serving northern regions of the Kingdom, but their medium size makes them more sensitive to market fluctuations compared to larger competitors.

Hail Cement Company (3001) competes with several major companies in the sector, such as Saudi Cement, Yamama Cement, and Qassim Cement. Hail Cement's strengths include its proximity to northern markets and low transportation costs for local projects. Its weaknesses include limited production capacity compared to competitors and a lack of product diversity.

Larger companies typically achieve higher profit margins due to economies of scale and their significant investments in operational efficiency improvements. While Hail Cement has relatively stable financial performance, its ability to distribute high dividends remains linked to its success in increasing productivity and controlling costs. The sector as a whole benefits from Vision 2030 projects, but fierce competition may impose additional pressures on medium and small companies.

When a company announces cash dividend distributions, the stock price often experiences a noticeable movement. On the Ex-Date, the stock price theoretically drops by the amount of the announced distribution, as new buyers after this date are not entitled to receive the dividends. For example, if the stock price is 12 SAR and a distribution of 0.50 SAR per share is announced, the stock may start trading at 11.50 SAR after the entitlement date.

However, market expectations regarding dividend distributions may affect the stock price before the official announcement, as investors tend to buy the stock before the distribution announcement to benefit from it. The company's market value changes according to these movements, but ultimately reflects the strength of financial performance and the sustainability of distributions in the long term.

To monitor dividend distributions in a specific company like Hail Cement, shareholders should track official announcements on the Tadawul website, which include:

1. Announcement of the board's recommendation for dividend distribution.
2. Invitation to the ordinary general assembly for distribution approval.
3. Determination of the Ex-Date and entitlement date.
4. Announcement of the actual dividend payment date.

Shareholders are advised to follow these dates through official sources such as the Tadawul website or the company's website directly, and to communicate with the brokerage firm or bank managing the investment account to ensure timely addition of dividends.

Hail Cement Company experienced some financial changes during 2024, with a net profit of 15 million SAR in the first quarter, a decrease of 19% compared to the same quarter of the previous year. Revenues reached approximately 73.8 million SAR, an annual increase of about 19%. The stock price ranged between 11 and 12 SAR, and the total market value was approximately 1.1-1.2 billion SAR.

The company had not announced dividends for the year 2023 by mid-2024, awaiting the results of the annual general assembly. The company is committed to fully disclosing its financial results and operational developments through the Tadawul website. If current trends continue, the company may announce cash distributions similar to previous years, considering the stability of profits and cash flows.

To calculate the market value of a company like Hail Cement, the number of issued shares (100 million shares) is multiplied by the current stock price (for example, 11.50 SAR), resulting in 1.15 billion SAR. The P/E ratio is calculated by dividing the market value by the annual net profits (for example, 1.15 billion ÷ 60 million = 19.2). The dividend yield is calculated by dividing the distributions by the stock price (0.50 SAR ÷ 11.50 SAR = 4.3%).

These indicators help investors evaluate the attractiveness of the stock in terms of dividend distributions, but they should not be considered sufficient alone for making an investment decision. The overall financial performance of the company and sector developments should also be reviewed before making any decision.

Transparency and disclosure of financial information are fundamental pillars for protecting shareholder rights in the Saudi stock market. Listed companies, such as Hail Cement, are required to publish all financial data and details of dividend distributions through approved official channels like the Tadawul website. The Capital Market Authority imposes penalties and fines on companies that delay disclosures or provide inaccurate information.

This transparency enables investors to monitor company results and make decisions based on accurate information, also contributing to enhancing trust in the Saudi financial market both locally and internationally. Therefore, it is always recommended to rely on official sources when following news about distributions or financial data for any company.