With most Saudi Arabian stocks trading near their fair value, investors would do best to target companies set to pay the most in dividends in 2017, according to the equities team at Aljazira Capital.

The Riyadh-based securities firm selected 10 stocks to recommend for dividend investors, after assessing these companies’ cash position, spending plans, debt profile and the latest corporate and industry developments. The team of analysts is led by acting head of research Talha Nazar, whose recommendations outperformed the average among his Saudi Arabian peers in the past year.

The following are Aljazira’s selections, along with the reasons for their inclusion in the list prepared for clients:

Saudi Telecom Co.

Tower-sharing deals likely to provide operational and capital expenditure savings

Regulator’s decision to allow companies to offer wider range of services will add to competition; however, ongoing challenges at competitors Zain Saudi and Etihad Etisalat Co. -- known as Mobily -- are positives for Saudi Telecom

Yanbu National Petrochemical Co.

Positive outlook on global ethylene and propylene demand

Increased sales and lower cost of feedstock support profitability

Saudi Vitrified Clay Pipe Co.

Well-placed to gain from growing Saudi Arabian housing industry

Beneficiary of National Transformation Plan implementation

Saudi Airlines Catering Co.

Competitive advantage and prospects linked to fleet expansion

Scope to add to service contracts with regional airlines, including Oman Air

Advanced Petrochemical Co.

Strong cash position

Recovery in crude oil to drive valuation

Saudi Cement Co.

Measures to streamline plant operations

Strong presence in eastern region

Southern Province Cement Co.

Diversified plant locations – Jazan, Bisha and Tahama

Access to the lucrative western region, where demand is projected to outpace other parts of Saudi Arabia

Yanbu Cement Co.

Implementation of waste-heat recovery system to achieve cost savings

Recovery in demand in western region to drive valuation

Qassim Cement Co.

Well-placed for recovery in demand from central region

Strong dividend payout history

Saudi Ground Services Co.

Beneficiary of rapid airports expansion

Strong long-term relationship with Saudi Arabia Airlines

Source:
courtesy of BLOOMBERG

by Filipe Pacheco

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