Dividend Powerhouses in the Gulf: Unearthing Sustainable Income and Growth in Saudi Arabia and Turkey

The Middle East is undergoing a transformation. As Saudi Arabia's Vision 2030 and Turkey's economic reforms reshape regional economies, investors are turning to dividend-paying stocks with geopolitical resilience and strong earnings fundamentals. Among the sectors leading this shift are banks and real estate firms, which offer double-digit yields, low payout ratios, and exposure to infrastructure growth. Here's why Saudi Arabian and Turkish firms like Riyad Bank, Alinma Retail REIT Fund, and Avrupakent Gayrimenkul are worth your attention.

The Case for Gulf Dividend Stocks

The Gulf's recovery is no secret. Saudi Arabia's non-oil GDP grew by 3.6% in 2024, driven by tourism, tech, and real estate. Turkey, meanwhile, has stabilized its currency and attracted $23 billion in FDI in 2024. Yet, many investors overlook the income potential of these markets.

Key advantages of Gulf dividend stocks:
1. High yields: With global bond yields near historic lows, Gulf firms offering 6%+ dividends—like Alinma Retail REIT's 7.23%—are rare.
2. Low payout ratios: Many companies reinvest strategically while maintaining payouts under 50% of earnings, ensuring sustainability.
3. Earnings resilience: Gulf firms have weathered inflation and geopolitical headwinds better than peers, with banks in Saudi Arabia reporting double-digit net income growth in 2024-2025.

Top Picks in Saudi Arabia: Banks and REITs Leading the Charge

1. Riyad Bank (SASE:1010)

• Dividend Yield: 6.23% (vs. Saudi banks' 4.4% average).
• Payout Ratio: 54.1% (near the 50% threshold, but earnings coverage is “reasonable”).
• Earnings Growth: Net income rose to SAR2.49 billion in Q1 2025, up 20% YoY.
• Why buy?: A value play with a P/E of 9.2x (below the market average). Riyad is expanding in digital banking and Islamic finance, aligning with Saudi's financial modernization.

2. Alinma Retail REIT Fund (SASE:4345)

• Dividend Yield: 7.23% (top-tier in Saudi Arabia).
• Payout Ratios: 46.9% (earnings) and 46.8% (cash), both comfortably below 50%.
• Earnings Growth: Turned profitable in 2024 after years of losses, with net income of SAR8.1 million and funds from operations (FFO) of SAR20.6 million.
• Why buy?: A contrarian pick trading below fair value. Its portfolio of malls in key Saudi cities (e.g., Riyadh's Al Makan Mall) aligns with rising consumer demand.

Turkey's Hidden Gems: Avrupakent Gayrimenkul (IBSE:AVPGY)

• Dividend Yield: 7.4% (among Turkey's highest).
• Payout Ratios: 16.2% (earnings) and 32.9% (cash), well below 50%.
• Earnings Growth: Despite a one-off loss in 2024, sales hit TRY808 million in Q1 2025, signaling recovery.
• Why buy?: A geopolitical play benefiting from Turkey's real estate boom. The firm focuses on affordable housing, a priority under the government's urbanization plans.

Risks and Considerations

• Saudi Arabia: Riyad Bank's payout ratio hovers near 50%, making it vulnerable to profit downgrades.
• Turkey: Currency volatility and political risks could pressure equity valuations.
• Both regions: Alinma Retail REIT's lack of analyst coverage and Avrupakent's past one-off losses require careful monitoring.

Investment Strategy: Buy, but Stay Selective

• Dividend investors: Prioritize Alinma Retail REIT for its rock-solid payout ratios and 7.23% yield.
• Growth investors: Pair it with Riyad Bank for its value and growth trajectory in Saudi's financial sector.
• Turkey exposure: Avrupakent offers a high-yield entry, but keep positions small until earnings stabilize.

Conclusion: The Gulf's Dividend Renaissance

The Gulf's economic transition isn't just about oil anymore. Banks and real estate firms in Saudi Arabia and Turkey are delivering income, growth, and stability to portfolios. While geopolitical and economic risks remain, the fundamentals of these high-yield, low-payout stocks suggest they're undervalued. For income-focused investors, these names offer a rare blend of resilience and opportunity in a region on the rise.

Final recommendation:
- Buy Alinma Retail REIT (SASE:4345) for income.
- Hold Riyad Bank (SASE:1010) as a value-driven growth play.
- Monitor Avrupakent (IBSE:AVPGY) for a pullback entry.

The Gulf's dividend story is just beginning.

[Disclaimer: Past performance is not indicative of future results. Consult with a financial advisor before making investment decisions.]