Saudi Telecom Co. experienced a significant surge in its stock price after announcing a record dividend increase, marking the company’s largest jump in almost a decade. The telecom giant’s decision to boost quarterly dividends and potentially offer special payments to investors propelled its shares up by over 9.9% at the start of trading on the Saudi stock exchange.
Dividend Increase:
STC, as the company is commonly known, revealed plans to pay a dividend of 0.55 riyals (equivalent to 15 US cents) per share every quarter for the next three years, commencing in the final quarter of 2024. This move represents a 37.5% increase in the annual cash dividend program, demonstrating the company’s confidence in its financial stability and growth prospects.
In addition to the quarterly dividend boost, Saudi Telecom also hinted at the possibility of distributing special dividends in the future. This decision will be based on a thorough assessment of the company’s financial standing, future outlook, strategic investments, and capital expenditure requirements.
Expansion Strategy:
STC is actively pursuing expansion initiatives to broaden its business operations beyond the borders of Saudi Arabia. In April, the company agreed to sell a majority stake in its towers unit, Tawal, to the kingdom’s sovereign wealth fund for $2.3 billion. This strategic move was aimed at generating funds to support the company’s growth strategy and global acquisition plans.
In 2023, Saudi Telecom acquired a stake in Spain’s Telefonica for $2.25 billion, signaling its interest in international investments. Recent reports suggest that the company has sought approval from the Spanish government to increase its stake in Telefonica further. Moreover, STC was engaged in discussions to acquire Altice’s Portugal unit, although the negotiations recently fell through, as reported by the Portuguese news site Eco.
Financial Performance:
Despite sales falling short of expectations, STC reported second-quarter profits that exceeded estimates in July. The company’s steady growth trajectory is attributed to robust domestic demand, driven by favorable energy prices. Bloomberg Intelligence analyst John Davies predicts mid-single digit revenue growth for Saudi Telecom throughout 2024, highlighting the company’s resilience and potential for further expansion.
In conclusion, Saudi Telecom’s remarkable dividend increase and strategic growth initiatives have positioned the company for continued success in the telecommunications sector. With a strong financial foundation and ambitious expansion plans, STC is poised to capitalize on emerging opportunities in the global market, solidifying its position as a leading player in the industry.