Arab National Bank's Dividend Strategy: A Deep Dive into Consistency and Yield for Saudi Investors

For income-focused investors in the Saudi banking sector, few names carry the weight of Arab National Bank (ANB). Over the past decade, ANB has demonstrated a remarkable ability to balance aggressive dividend payouts with financial prudence, even amid economic volatility. As of July 2025, the bank's forward dividend yield stands at 6.28%, a figure that rivals some of the most generous income stocks in the region. But does this yield reflect sustainable value, or is it a flash in the pan?

A Decade of Dividend Discipline

ANB's dividend history from 2015 to 2025 reveals a pattern of resilience and adaptability. While the bank's payouts have fluctuated—such as the 2020 dip to SAR 0.2625 and the 2021 rebound to SAR 0.3000—the trajectory over the last three years has been striking. In 2023, ANB paid SAR 0.4875 in July, followed by SAR 0.6500 in February and August 2024, marking a 30% average annual growth rate. This acceleration has been driven by a combination of strategic loan portfolio expansion (up 15.38% year-on-year in H1 2025) and disciplined cost management, including a 7% reduction in building-related expenses.

The 2024 stock split (4:3 ratio) further amplified the accessibility of these dividends, adjusting historical payouts to maintain shareholder value. For context, ANB's 2025 ex-dividend date of February 10, 2025, preceded a payout of SAR 0.6500—its highest in a decade. This consistency, despite macroeconomic headwinds like elevated credit loss provisions (driven by IFRS 9 compliance), underscores the bank's commitment to rewarding shareholders.

Financial Fortitude: Profitability and Capital Strength

ANB's ability to sustain—and even grow—its dividend payouts is rooted in its financial performance. In H1 2025, the bank reported a 7% year-on-year increase in net profit to SAR 2.6 billion, fueled by a 6.09% rise in special commission income. This growth was underpinned by a 15.38% expansion in its net loans and advances portfolio and an 11.14% increase in net investments. While operating expenses rose (notably in wages and provisions for expected credit losses), the bank's proactive risk management and robust fee income generation offset these pressures.

Equally critical is ANB's capital position. As of June 30, 2025, its CET1 capital adequacy ratio stands at 16.6%, comfortably above the Saudi Arabian Monetary Agency's (SAMA) 8% minimum and the industry average of 16.41% in H1 2016. This buffer provides ample room for dividend distributions without compromising financial stability. Analysts at Jefferies have even flagged ANB as a “dividend survivor,” projecting an average yield of over 6% through 2027, assuming a 12.5% return on tangible equity (ROTE).

Regulatory Tailwinds and Macroeconomic Challenges

The regulatory environment in Saudi Arabia is evolving in ANB's favor. SAMA's proposed reduction of bank guarantee requirements for finance companies—from 100% to 20% of minimum required capital—could free up liquidity for institutions like ANB. This, combined with Vision 2030's push for digital banking and financial inclusion, positions the bank to expand its fee-based income streams (e.g., digital interfaces, SME lending) while maintaining capital ratios.

However, risks persist. Global oil price volatility and regional geopolitical tensions remain wild cards. ANB's 2025 economic outlook, while cautiously optimistic, acknowledges the potential for reduced lending activity and higher non-performing loans. Investors must also consider the bank's 2025 net profit margin of 5.4%—a healthy but modest figure compared to peers like Al Rajhi Bank (6.8%).

The Investment Case: Yield vs. Sustainability

For income-focused investors, ANB's 6.28% yield is undeniably compelling. But sustainability is the key question. The bank's capital buffer, 30% dividend growth over three years, and strategic focus on fee income (up 9.76% YoY in Q2 2025) suggest that this yield is more than just a short-term gimmick. Jefferies' 6%+ average yield projection through 2027 adds further credibility.

That said, prudence is warranted. ANB's dividend payout ratio—while well-covered by earnings (66.6%) and cash flows (42.1%)—leaves little room for error in a downturn. Diversifying exposure across the Saudi banking sector (e.g., pairing ANB with lower-yielding but more resilient peers like Riyad Bank) could mitigate this risk.

Final Takeaway

Arab National Bank's dividend strategy is a masterclass in balancing ambition with caution. Its 6.28% yield, supported by a decade of consistency and a robust capital position, makes it a standout for income investors. Yet, the bank's future success will hinge on its ability to navigate macroeconomic turbulence and regulatory shifts. For those willing to accept the inherent risks of the Saudi banking sector, ANB offers a compelling mix of yield and growth—provided the broader economic stars align.

As always, investors should monitor ANB's quarterly earnings and credit quality metrics, particularly in light of SAMA's evolving regulatory framework. In a market where certainty is elusive, ANB's dividend history and capital strength provide a rare anchor.