(Bloomberg) — Saudi Aramco’s annual dividend of $75 billion is already the world’s biggest, but the oil producer may have to raise it to follow peers, according to Bank of America.

“A dividend increase is needed to stay competitive,” BofA analysts led by Karen Kostanian said in a research note, ahead of the company’s second-quarter results on Sunday. “Especially given that higher oil prices and OPEC+-driven production increases should support a significant free cash flow increase over the next couple of years.”

The analysts said one option is for Aramco to keep the payout unchanged for the government, which owns 98% of the stock, but raise it for minority shareholders.

Aramco declined to comment.

The world’s biggest energy company had to turn to the debt market last year to help fund the dividend after its earnings plunged with the onset of the coronavirus pandemic. But oil prices have surged 40% in 2021 to around $70 a barrel as major economies reopen. The rise in demand has enabled the Organization of Petroleum Exporting Countries and its allies — a group known as OPEC+ and led by Saudi Arabia and Russia — to ease output cuts they started early last year.

Firms such as BP Plc, Chevron Corp. and Royal Dutch Shell Plc are hiking share buybacks and payouts, confident the worst of Covid slump is over. Their goal is to woo investors who are becoming increasingly wary about the fossil-fuel industry.

Aramco’s current payout lags that of its competitors in relative terms. Its indicated dividend yield is roughly 4%, while BP, Chevron and Exxon Mobil Corp. all pay above 5%.

The Riyadh-based firm’s dividend is a crucial source of funding for the Saudi government, which is trying to narrow a budget deficit that widened to 12% of gross domestic product last year.

BofA expects Aramco made a net profit of $24 billion in the second quarter, up 16% from the previous three months and 258% year-on-year. The bank forecasts that free cash flow will climb to $95 billion this year and — at an assumed oil price of $75 a barrel — to $120 billion in 2022.

–With assistance from Lukas Strobl and Salma El Wardany.

© 2021 Bloomberg L.P.

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