Two Saudi Arabian telecom stocks have delivered the best returns in the nation’s equity market this year in a rally spurred by retail investors hoping for dividends. Most analysts see the gain as unsustainable.

Mobile Telecommunications Co., or Zain KSA, and Etihad Etisalat Co. advanced over 40 per cent this year, almost three times the advance of the main Saudi index. Analysts surveyed by Bloomberg are sceptical and have an average target price for them at about a 10 per cent and 20 per cent discount from their current values respectively.

Etihad Etisalat, known as Mobily, climbed in 2019 after posting a smaller-than-expected loss for last year and an unexpected first-quarter profit. The company has to find a balance between dividends and repaying debt, according to its Chief Financial Officer Kais Ben Hamida, after the company halted payouts in 2014.

Mobily’s share gain “is driven by speculation following the last couple of quarterly results” that dividends will shortly return, said Omar Maher, a telecom analyst at EFG-Hermes in Cairo. He doesn’t expect the company to resume payouts anytime soon with its current level of profitability and while it prioritises deleveraging.

Zain reported a profit in the first quarter, but missed analyst estimates. Telecom stocks may also be benefiting from inflows after the country’s was included in major emerging-market benchmarks in recent months, Maher added.