The Diversification Dividend:
Middle East 2024

Companies which diversify their revenue streams offer greater returns to their shareholders than those who don’t. Our latest study looked at the shareholder return data of 579 listed companies in the Middle East between 2010 - 2019 (period 1) and 2020 - 2023 (period 2) to compare the performance of those who added new revenue streams (classified as “diversifiers”) to those that did not. We analysed their Total Shareholder Return (TSR) metrics, resulting in a stark warning: a lack of diversification can be disastrous for shareholder value

Download Middle East Report 2024

The Diversification Dividend: MIDDLE EAST 2024

Key Findings

Scaling Success

Companies adding new revenue streams over time outperform peers that stick to their core business in terms of stock market performance.

Pandemic Resilience

During the COVID years and beyond (2020 - 2023) vs. (2010 - 2019), companies that added one or more revenue streams (“diversified”) improved their median TSR percentage by 104%, compared to only 40% observed in their non-diversified peers.

Strategic Momentum

Economic diversification and growth are top priorities of national strategies in the Middle Eastern region, which strongly boosts the efforts of visionary executives in diversifying and future-proofing their companies.

The Diversification Dividend

2024 Edition

Stryber, a leading strategic growth consultancy and corporate venture builder, analysed sales and total shareholder return data for its newly released report, “The Diversification Dividend”. The findings offered a stark warning: a lack of diversification can be disastrous for shareholder value.

The importance of diversification was underscored during COVID. In the preceding period of calm between 2010-2019, businesses that had consciously added revenue streams during this period delivered 16% superior annual median total shareholder returns. In the turbulent years of 2020-2023, that number shot up to 53%.

The findings are published in the latest report from Stryber, entitled “The Diversification Dividend” - which continues research first conducted in 2021, in its “The Power of Diversification” report.

"Our research demonstrates that diversification is not only a strategy for growth but also a hedge against market volatility. Companies that focus solely on their core business may see short-term efficiency gains, but they risk long-term value destruction. On the other hand, if they have the capability to add new revenue streams, whether through M&A or venture building, they are better positioned to weather economic uncertainty and deliver long-term value to shareholders”

Jan Sedlacek

Co-founder and Managing Partner at Stryber

Methodology

We analysed sales and total shareholder return data from Refinitiv Datastream for 579 listed companies in the Middle East. Key country sample sizes for the companies are: KSA 113, Egypt 87, UAE 71, Kuwait 57 and 251 for the rest of MENA.

Total shareholder return [%] is, as per the Refinitiv Worldstream Return Index (RI) variable, defined as the increase in stock price over a certain period plus the dividend payout, assuming reinvestment of dividends. Our research focused on listed companies with the largest market capitalisation where stock market data was available for the periods between 2010-2019 and 2020-2023.

We analysed five points for every company. First, we calculated the relative amount of revenues in 2019 generated by business segments that did not exist in 2010. We followed the reporting of revenue segments in companies' annual reports.

While, as an example, Netflix started testing online streaming prior to 2010 was first incorporated in the 2012 annual report. This is common practice: ideate, test and iterate new business models until one creates enough traction to become a standalone segment.

Secondly, we analysed the average annualised total shareholder return for each company between 2010 and 2019 and - where available - between 2020 and 2023.

As a next step, we segmented the companies into two groups, determined by the level of revenues in 2019 generated from new segments that did not exist in 2010: 0% (no revenue from new segments) and over 0% (revenue from at least one new segment). We then calculated the medians of the annualised shareholder returns and the means of the number of revenue segments for the two groups and compared these two metrics across the groups.

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The Diversification Dividend: Middle East 2024