Saudi Islamic Quant High

Dividend Equity Strategy -

Does it work? By: Hany Hussein, CFA

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Methodology

The quantitative quant strategy is based on 4 different layers of screening:

Ethics / Sharia

Safety

Valuation

Financial Performance

Ethics / Sharia

Safety

Valuation

Financial

Performance

Using Sharia’a Principals to screen the entire Saudi 161 companies into 144 sharia

complaint companies

•Market Cap threshold of SR 1.0 billion to remove the small cap biase

• Minimum daily liquidity of SR 1.0 million to remove the illiquid companies

• Minimum Dividend Yield of 5.0% p.a. ( TTM)

• Maximum Price to Earnings of 15x ( TTM)

• Minimum ROE of 15 % (TTM)

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The short List – 20 stocks

Short Name Yield - TTM PE - TTM

Market Cap

mln

Avg Vol. 3

mths ROE - TTM

SAUDI CEMENT 9.03 13.4 14,726 78,368 34.25

QASSIM CEMENT 7.90 13.0 7,290 58,047 28.52

SAUDI ARABIAN FE 7.88 13.3 51,415 143,299 45.31

SAUDI CHEMICAL C 7.83 9.1 2,637 280,349 20.78

ADVANCED PETROCH 7.63 14.1 4,641 430,764 16.13

SAUDI VITRIFIED 7.33 11.5 1,009 50,632 38.61

NIC 7.22 10.9 19,198 1,445,236 15.29

MEDITERRANEAN & 7.14 10.3 2,064 481,508 17.06

SOUTHERN PROVINC 7.00 14.5 14,490 29,919 37.15

CO FOR COOPERATI 6.76 10.0 3,195 242,037 15.25

TABUK CEMENT 6.60 11.9 2,219 68,840 16.58

AL-HASSAN G.I. S 6.53 12.4 2,328 89,996 37.19

YAMAMAH CEMENT 6.32 11.2 9,153 199,071 23.44

EASTERN CEMENT 6.31 13.6 5,396 95,160 17.92

ALDREES PETROLEU 5.78 11.6 1,110 308,820 20.95

FAWAZ ABDULAZIZ 5.77 13.5 7,683 46,392 35.83

AL ABDULLATIF IN 5.64 10.1 2,665 107,875 21.54

SABIC 5.57 11.3 278,250 5,394,536 17.30

ARRIYADH DEVELOP 5.52 9.5 2,175 1,428,161 15.11

SADAFCO 5.13 13.6 2,129 56,916 20.07

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12 Months Performance – Total Return

Methodology:

- We assumed a hypothetical equal weighted portfolio ( i.e. one stock for each constituent company)

- Average dividend yield of the portfolio picks was 6.7% vs. 3 % for Tadawul. Both were added to March 2013’s

reading

-10%

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

Mar-

12

Apr-

12

May-1

2

Jun

-12

Jul-12

Aug-1

2

Sep-1

2

Oct-

12

Nov-1

2

Dec-1

2

Jan

-13

Fe

b-1

3

Mar-

13

Saudi Quant High Dividend Picks Tadawul Index