Dividend Distributions in the Saudi Financial Market: A Comprehensive Guide and

Dividend distributions are an integral part of the strategy of listed companies in the Saudi financial market (Tadawul), representing the tangible translation of the company's operational success into a concrete return for shareholders. Conceptually, dividends are defined as a portion of the company's net profits allocated for distribution to shareholders, either in cash, as additional shares, or in kind. In the Saudi context, these distributions are subject to a strict regulatory framework overseen by the Capital Market Authority, requiring companies to transparently disclose their financial results and plans for profit distribution. The importance of dividends lies in their indication of the company's stability and profitability, reflecting its ability to generate consistent income and distribute it regularly. Some companies, particularly in mature sectors like banking and cement, aim to maintain a stable distribution record to attract investors seeking periodic returns. Conversely, growth companies may prefer to reinvest their profits to enhance expansion rather than distribute them. In the Saudi stock market, dividend distribution policies are a key criterion in evaluating companies, affecting the attractiveness of stocks to both individual and institutional investors. This significance is particularly evident during economic fluctuations, as companies that maintain stable distributions are often viewed as relatively safe havens compared to those that cut or reduce distributions. Regular disclosure of the distribution ratio, value per share, and eligibility and payment dates enhances investor confidence and reduces uncertainty. Notably, some investors in the Saudi market build entire investment strategies around selecting stocks with regular yields, paying special attention to sectors that adhere to clear distribution policies. Ultimately, it can be said that dividends are not just a financial element but a strategic tool for building trust and enhancing the sustainability of the relationship between the company and its shareholders.

The process of distributing dividends in the Saudi financial market is subject to precise regulatory procedures aimed at ensuring transparency and equality among all shareholders. This process begins with the company's board of directors reviewing the annual or quarterly results and determining the portion of net profits that can be distributed after deducting the required statutory reserves (usually 10% or 20% of the capital according to the company's bylaws). The board then proposes the amount of distributions and its ratio per share, which is presented to the general assembly of shareholders for final approval. Once the general assembly approves the distribution plan, the company is obligated to officially disclose the details of the distributions, including the cash or in-kind value per share, eligibility, and payment dates. These details are published through official platforms such as the Saudi Stock Exchange (Tadawul) to ensure that information reaches all investors simultaneously. It is important to note that Saudi corporate law requires companies to maintain a minimum level of reserves before proceeding with distributions, thereby enhancing financial solvency and protecting the rights of creditors and shareholders in the long term. Additionally, distributions must not exceed retained or actually realized profits, preventing companies from distributing illusory dividends or burdening their balance sheets with uncovered liabilities. The eligibility date determines the names entitled to receive dividends, typically the second day after the general assembly meeting. The payment date is when the company actually begins transferring dividends to shareholders' accounts, usually within two weeks to a month from the eligibility date. The Capital Market Authority requires companies to disclose any changes in the distribution plan or delays in payment immediately and officially. These regulatory procedures ensure the rights of all shareholders and reduce the risks associated with lack of transparency or manipulation, allowing investors to build accurate expectations regarding the periodic returns on their investments. Ultimately, this regulatory framework reflects the Saudi market's commitment to the highest standards of governance and financial disclosure.

Dividend distributions in the Saudi financial market are divided into three main types: cash distributions, in-kind distributions, and bonus shares. Each type has its characteristics, objectives, and different impacts on shareholders and the company. Firstly, cash distributions are the most common, where a specified cash amount is transferred to shareholders' accounts based on the number of shares they own. This type provides investors with immediate liquidity and is a preferred option for many seeking periodic income. For instance, Hail Cement announced a cash distribution of 0.25 SAR per share for the third quarter of 2023, serving as a practical example of this type. Secondly, in-kind distributions refer to providing shareholders with non-cash assets, such as shares in subsidiary companies or tangible assets. In the Saudi market, this type is less frequently used compared to cash distributions and often occurs within the framework of ownership restructuring or distributing non-cash assets for specific uses. Thirdly, bonus shares are granted to shareholders as additional shares without cash consideration, achieved by allocating part of profits or reserves to increase capital and then distributing them to shareholders at specific ratios. The goal here is to enhance capital without cash outflow from the company, often utilized by companies looking to expand their capital base or reward shareholders without affecting cash flow. Each type of distribution has its accounting implications and impacts on the company's structure and stock price. While cash distributions enhance the attractiveness of the stock for income-seeking investors, bonus shares may indicate the company's desire for future expansion. In-kind distributions typically appear in special cases related to restructuring or asset distribution. Investors should understand these types and choose what aligns with their financial goals and market strategies, keeping in mind that each type carries different advantages and challenges in terms of liquidity, taxation, and its effect on the market value of shares.

The regulations governing the Saudi financial market impose strict controls on listed companies regarding dividend distribution, aiming to ensure financial governance and protect the interests of all stakeholders. Among these controls, companies are required to allocate a specific percentage of annual net profits to form a statutory reserve, often set at 10% to 20% of the capital until the total reserve reaches a certain limit defined in the company's bylaws. This reserve aims to enhance the company's financial stability and enable it to face any emergency risks or unexpected market fluctuations. Additionally, regulations prevent companies from distributing dividends that exceed retained or actually realized profits, protecting the market from the phenomenon of illusory distributions that could threaten the company's sustainability and its ability to meet future obligations. The Capital Market Authority also requires accurate disclosure of annual and quarterly business results and any changes in accounting policies or estimates that may affect the distributable net profits. Distribution decisions must also include the approval of the general assembly, ensuring shareholder participation in the final decision and limiting any administrative excesses. On the other hand, companies are obligated to disclose any significant events that may affect their ability to distribute dividends, such as changes in assets or liabilities or entering into major acquisition deals, as occurred with Qassim Cement's acquisition of Hail Cement in 2024. All these controls aim to support transparency and trust in the market, enabling investors to make decisions based on clear and reliable information. It is important for investors to carefully review financial statements and annual reports to understand the company's compliance with these controls and the sustainability of its distribution policies.

The process of distributing dividends in Saudi companies begins with the board of directors reviewing the annual or quarterly financial performance and assessing the ability to achieve distributable profits after accounting for all expenses and statutory reserves. Once it is confirmed that there are distributable profits, the board formulates a proposal specifying the percentage or amount of profit intended for distribution per share, based on the results of financial analysis, available liquidity, and the company's future plans. This proposal is then presented to the extraordinary or ordinary general assembly of shareholders, which is usually held in the first or second quarter of each year. Regulations require that invitations and the agenda be sent well in advance of the assembly, clearly including the dividend distribution item. During the meeting, shareholders discuss the financial report and the board's recommendation, followed by a vote on the approval of the distributions. If the majority agrees, the decision becomes binding, and the company is obliged to publish an official announcement on the Tadawul platform detailing the distribution: the value of dividends per share, the total amount distributed, the number of eligible shares, eligibility and payment dates, and any additional instructions for shareholders, such as updating banking information. For example, Hail Cement announced in October 2023 the board's decision to distribute cash dividends for the third quarter, which was approved at the general assembly, with precise eligibility (November 21, 2023) and payment (December 11, 2023) dates specified. This procedural sequence provides a clear framework that protects shareholders' rights and prevents executive management from making unilateral decisions regarding profits without owners' approval. It also reinforces the principle of transparency and allows investors to plan financially based on official and reliable information. In cases requiring sudden changes or reconsideration of the distribution proposal, the company is obliged to present the matter again to the general assembly and fully disclose the justifications.

Determining the eligibility date and payment date is a crucial step in the dividend distribution process, ensuring fairness and transparency in identifying the shareholders entitled to dividends. The eligibility date is the day on which the list of eligible shareholders for distributions is determined, usually the second day after the general assembly meeting that approved the distributions. In the Saudi market, investors must own the stock approximately three trading days before the eligibility date to be included in the list of eligible shareholders. A practical example is Hail Cement's announcement of the eligibility date for third-quarter dividends on November 21, 2023, aligning with the approved timeline in the market. Following that, the payment date is established, which is the day the company actually begins transferring dividends to shareholders' accounts. Typically, there is a time gap of two weeks to a month between the eligibility and payment dates to complete auditing and banking reviews. In the case of Hail Cement, dividends were actually paid on December 11, 2023, about three weeks after the eligibility date. This timeline allows companies sufficient time to verify shareholder data and ensure the accuracy of financial transfers, while also enabling investors to accurately anticipate when they will receive their dividends. It is important for shareholders to keep their banking information updated with companies or financial intermediaries, as having updated bank accounts is required to receive dividends automatically. In the event of any delay or issue in payment, the company is obliged to immediately disclose the reasons and corrective actions on the Tadawul platform. This timing regulation aims to protect investors' rights and reduce disputes over entitlement, reflecting the Saudi market's commitment to international governance standards in dividend distribution.

Listed companies in the Saudi financial market place significant importance on ensuring that distributed dividends reach shareholders quickly and smoothly. In recent years, direct bank transfers have become the standard method for paying dividends, with amounts due automatically deposited into the bank accounts linked to investors' portfolios at deposit centers. This system requires shareholders to ensure that their personal and banking information is updated with brokerage firms or the deposit center, as any errors or outdated information may lead to delays or disruptions in the payment process. The importance of this procedure is highlighted in company announcements, such as Hail Cement, which emphasized in its third-quarter 2023 profit announcement the necessity of updating banking information to ensure the immediate deposit of dividends. If a transfer cannot be made for any reason (such as account closure or an error in the IBAN), the company retains the due amount in the shareholder's name until the data is reviewed and updated. In addition to bank transfers, some companies provide alternative options such as issuing checks or transferring through specific banks in exceptional cases or for shareholders unable to receive electronic transfers. Companies are also obliged to announce in advance the payment dates and follow-up procedures in case of inquiries or technical issues. It is noteworthy that the shift to electronic payment has contributed to reducing error rates and simplifying procedures for both the company and the investor, enhancing shareholder satisfaction and trust in the market. Furthermore, having accurate electronic records facilitates auditing and review processes by regulatory authorities. In the regulatory context, the Capital Market Authority emphasizes the obligation of companies to periodically update shareholder data and cooperate with banks to ensure the effectiveness of the automated payment system. Ultimately, the transparency of procedures and ease of access to dividends play a significant role in enhancing the attractiveness of investment in the Saudi market.

Dividend yield is a key indicator used by investors to assess the attractiveness of listed stocks from an income perspective. This yield is calculated by dividing the total annual cash distributions by the market price of the stock at the time of the distribution announcement, then expressing it as a percentage. This ratio reflects the return an investor receives for every riyal invested in purchasing the stock, making it an important benchmark when comparing different companies or sectors. For example, if Hail Cement announced a distribution of 0.25 SAR per share in the third quarter of 2023, and the stock price at the time of the announcement was around 10 SAR, the quarterly yield would be 2.5% of the nominal value, or 2.5% of the market price if they are equal. However, if the stock price in the market is higher (for example, 28 SAR as in early 2024), the actual yield decreases to approximately 0.89%. Investors should compare the dividend yield with the average yields of the sector, as cement companies tend to achieve total annual yields ranging from 2% to 6% depending on business results. Additionally, a high yield may indicate the quality of dividend distribution or possibly a decline in stock price for other market-related reasons. It is important for investors to understand that a high yield does not always mean the stock is better, as it may reflect market expectations of a potential decline in future profits or challenges facing the company. Conversely, companies that maintain a stable and average yield are often considered more stable and attractive to investors seeking regular income. It is advisable to always analyze dividend yield within the context of other indicators such as the price-to-earnings (P/E) ratio, liquidity ratios, and sector indicators, rather than relying solely on this figure in isolation from other financial data.

Dividend distributions play a central role in shaping investor strategies, especially in the Saudi financial market, where many seek stability and periodic returns in their investments. Conservative investors—both individuals and institutions—tend to prefer stocks that offer regular and high dividends, relying on these distributions as a stable income source that helps achieve long-term financial goals, such as retirement expenses or funding periodic expenditures. In the Saudi context, the popularity of this strategy is evident in the demand for sectors like banking and cement, which traditionally adhere to clear distribution policies. Dividend distributions provide relative protection against market fluctuations, enabling investors to achieve returns even if the stock price does not rise significantly. On the other hand, some investors rely on a dividend reinvestment strategy, meaning they purchase additional shares with the dividends received, increasing their stake in the company and enhancing the effect of compound returns over the long term. Conversely, growth-seeking investors may prefer to invest in stocks that do not distribute dividends or distribute minimal amounts, favoring that the company reinvest profits in expanding operations or research and development, thereby increasing the stock's market value in the future. In the Saudi market, choosing the optimal strategy depends on factors such as the investor's age, financial goals, risk tolerance, and overall market conditions. Additionally, regulatory or economic changes (such as rising interest rates or major mergers) may prompt investors to shift their strategies between focusing on returns or growth. In all cases, dividend distributions remain a fundamental element in evaluating the overall performance of investments, and it is recommended to analyze them in light of other financial indicators and compare them across the sector to determine the suitability of the stock for the investor's portfolio.

The cement sector is one of the most committed sectors to dividend distribution policies in the Saudi financial market, due to its relative stability and reliance on continuous local demand in housing and infrastructure projects. Hail Cement serves as a vivid example of this commitment, having maintained a regular dividend distribution approach despite economic challenges. In the third quarter of 2023, the company announced a cash dividend distribution of 0.25 SAR per share, equivalent to 2.5% of the nominal value, with a total distributed amount exceeding 24 million SAR over 96.4 million shares. This indicates that the company's policy focuses on achieving a balance between the sustainability of distributions and enhancing financial reserves. Regarding the timeline, the company set the eligibility date for November 21, 2023, and the payment was executed on December 11, 2023, emphasizing the need for shareholders to update their banking information to ensure immediate deposit. This regulatory commitment and transparency in disclosing financial details reflect the maturity of the cement sector in managing its relationship with investors. In terms of performance, dividend distributions are influenced by factors such as energy prices, raw material costs, and the demand for cement, in addition to internal and external competition. Despite the challenges faced by the sector between 2020 and 2024, such as fluctuations in oil prices and the impacts of major state projects, Hail Cement managed to maintain relative stability in distributions. The recent acquisition by Qassim Cement in June 2024 marks a pivotal shift that may reshape the distribution policies of the unified company, especially with enhanced operational efficiency and new growth prospects. Overall, Hail Cement's experience serves as a model for investors to study the dynamics of the cement sector and its impact on the sustainability of dividend distributions.

Mergers and acquisitions are among the most significant events affecting dividend distribution policies, as they may open new avenues for achieving operational efficiency and increasing the ability to distribute higher returns to shareholders, or prompt companies to temporarily delay distributions in favor of capital investments. In the Saudi market, the cement sector witnessed a prominent example of this with Qassim Cement's acquisition of Hail Cement in June 2024. This acquisition created a larger entity with a broader asset base and greater negotiating power in the market, increasing the chances of achieving higher future operating profits. However, the merger phase is often followed by a period of financial and administrative restructuring, where the new management may prefer to direct a portion of profits to fund expansions or strengthen the financial position before returning to regular distribution policies. On the other hand, the unified company may aim to maintain its distribution record to attract investors and enhance confidence, especially if both entities prior to the merger had a strong distribution record. In the case of Hail Cement, a detailed financial report for the unified company has not yet been issued following the acquisition, but the first quarterly reports after the merger are expected to reveal the impact of this deal on distributable profits. It is important for investors to monitor official announcements and decisions from the new company's general assembly, as any change in distribution policy must be supported by clear justifications, such as the need to finance expansion projects or address market fluctuations. Overall, mergers can enhance the ability to distribute higher future dividends due to improved efficiency and cost reductions, but they may require a transitional period during which the level of distributions declines until the new entity stabilizes.

The sustainability of dividend distributions in the Saudi market is subject to a range of economic and sectoral factors that determine companies' ability to continue distributing regular and attractive returns to investors. Among the most significant of these factors are fluctuations in energy prices, as fuel costs represent a substantial portion of operating expenses in sectors like cement, and any changes in prices or government support directly impact profit margins. Additionally, levels of local demand, driven by major infrastructure projects such as housing and economic cities (NEOM, Qiddiya), affect sales volume and revenues, and thus the distributable profits. In terms of competition, companies face challenges from both local and foreign plants, putting pressure on prices and affecting profit levels. Furthermore, regulatory changes play a critical role, such as the imposition of environmental fees or updates to carbon emission standards, which may raise operating costs and prompt companies to reduce distributions or reinvest profits to improve environmental efficiency. Sectorally, companies in mature and saturated sectors (such as cement and banking) tend to maintain stable distribution ratios, while growth or technology companies prefer to reinvest profits to expand operations. In recent years, government stimulus policies and major investments have supported the sustainability of distributions, but rising interest rates globally and locally since 2023 have led to some caution in distribution policies. Ultimately, a thorough evaluation of the sustainability of distributions is linked to analyzing financial data, reviewing reserve ratios, and monitoring developments in the economic and regulatory environment, enhancing investors' ability to make informed decisions regarding the suitability of investing in dividend-paying stocks.

The Saudi cement sector is characterized by a variety of companies and diverse dividend distribution policies, providing investors with various options based on their goals. In recent years, companies like Qassim Cement, Yamama Cement, and Saudi Cement have shown a commitment to regular distribution policies, driven by high production capacities and strong financial reserves. For instance, Qassim Cement announced in 2024 its acquisition of Hail Cement, enhancing its ability to distribute future dividends by expanding its asset base and reducing costs through economies of scale. Meanwhile, Yamama Cement focuses on achieving stable annual distributions, benefiting from its geographical location in the Riyadh region and increasing demand from government projects. Conversely, smaller or locally focused companies like Al-Jouf Cement face challenges in maintaining distribution levels during periods of declining demand or rising costs. In terms of yield, annual distribution rates range between 2% and 6% depending on business results and market fluctuations. Larger companies often reflect lower price-to-earnings (P/E) ratios due to the stability of their profits and distributions, while medium-sized companies or those undergoing restructuring may show higher ratios due to cautious market expectations. It is also noted that some companies tend to distribute quarterly or semi-annual dividends, while others may only distribute annually, depending on management strategy and company liquidity. Overall, comparing distribution policies among cement companies is an important tool for assessing risks and returns, and investors are advised to review financial reports, distribution ratios, and accumulated reserves before making any investment decisions.

Transparency and disclosure play a crucial role in enhancing investor confidence in the Saudi stock market, especially regarding dividend distributions. The Saudi Capital Market Authority requires all listed companies to disclose any decisions or updates related to distributions through official platforms, primarily the Tadawul platform. Announcements must include precise details such as the value of distributions per share, the total amount to be distributed, eligibility and payment dates, and any special instructions regarding updating banking information or payment mechanisms. These disclosures enable all investors to access information simultaneously, preventing manipulation or unfair advantage from insider information. In the case of Hail Cement, the announcement of the third-quarter 2023 dividend distribution included all required data, clearly specifying eligibility and payment dates, along with advice for shareholders to update their banking information to ensure smooth transfers. Companies are also obliged to promptly disclose any changes or delays in the distribution plan, stating the reasons and justifications, allowing investors to monitor developments and plan financially according to the announced timeline. In addition to the Tadawul platform, companies also provide information through their websites, annual reports, and investor service centers, enhancing the regulatory environment and reinforcing the principle of full disclosure. The impact of transparency is evident in reducing disputes, facilitating auditing and review processes, and increasing the attractiveness of the Saudi market to both local and international investors. Ultimately, adherence to disclosure and transparency is one of the main pillars for sustaining trust in the Saudi financial market and the attractiveness of dividend-paying stocks.

The Saudi financial market has witnessed several significant developments in 2024 and 2025 that have directly and indirectly affected dividend distribution policies, particularly in the cement sector. Among the most important of these developments was the completion of Qassim Cement's acquisition of Hail Cement in June 2024, which formed a new entity with a broader financial base and stronger competitive capacity. Investors are anticipating the results of this merger regarding distributions, as it is expected to lead to increased operational efficiency and open new growth prospects, with a possibility of temporarily restructuring distribution policies to reinvest profits in expansion projects or strengthen the financial position of the unified entity. On the economic front, the Saudi government launched several major infrastructure and housing projects during 2024, which increased the demand for cement and enhanced companies' ability to achieve distributable profits. However, rising interest rates globally and locally have led to some caution in distribution policies, as some companies preferred to retain a larger portion of profits to face future challenges. Legislative updates have also occurred in the market regarding disclosure and transparency regulations, tightening oversight on announcing distributions and ensuring that information reaches all investors simultaneously. In terms of market performance, shares of cement companies, such as Hail Cement post-acquisition, have seen a notable increase in prices, impacting dividend yields as a percentage of market price. Overall, these developments reflect the importance of following official news and quarterly and annual reports, as any changes in policies or economic conditions directly impact dividend distribution decisions. Investors are always advised to review official data issued by companies and the Capital Market Authority before making any decisions related to dividend distributions.