Despite a 44 percent drop in its 2020 profits, the Saudi Arabian government has instructed majority-state-owned Saudi Aramco to stick to the US$75 billion per year dividend payout for shareholders that it pledged at the time of the company’s initial public offering (IPO) in December 2019. Sticking to such a huge dividend payout – a guaranteed US$18.75 billion paid every quarter – has necessitated a significant cut in Aramco’s capital expenditure in the coming year that will damage the company’s prospects for growth and even the sustainability of its current operations. So why does the Saudi government not just reduce the dividend payable to Aramco’s shareholders instead? The basic answer to this often-asked question is that without such a massive payment being guaranteed virtually no one would have bought the shares in the first place and few would hold on to them now. This failure then or now would […]