By Saudi Aramco held firm on its massive $29.4 billion quarterly dividend even as weakening oil markets left free cash flow covering only 87% of the payout—a stark deterioration from 112% coverage just one year ago. This growing disconnect between cash generation and distribution policies underscores the mounting pressure on the energy giant’s balance sheet, as it increasingly relies on debt and reserves to fund the world’s largest dividend program.
Cash Flow Analysis:
- FCF Generation: $25.6B (-18% YoY)
- Funding Gaps:
- $3B in new bonds issued
- Drawing $1.8B from reserves
Dividend Dependencies:
- Sovereign Needs
- 82% of payout funds Saudi government budget
- Critical for Vision 2030 projects
- Investor Expectations
- Yield now at 4.2% (vs 3.8% for Exxon)
- Retail investors hold 23% of float
Risks Ahead:
- Brent below $85 threatens further FCF erosion
- S&P flags “negative outlook” on dividend coverage