Dividends: Where the billions flow

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  Serge Nussbaumer
  Chefredaktor

Fists will be flying in the St. Jakobshalle on March 8. The “Boxing beider Basel” event will be held there for the fourth time. 25 to 30 amateur boxers from the city on the Rhine and the surrounding area will compete against Team Zurich. Before the athletes get into the ring from 12.30 p.m., the staff at St. Jakobshalle are called upon. This is because the Novartis Annual General Meeting will take place in the famous hall the evening before. The backdrop for the pharmaceutical company’s shareholders’ meeting is not much different. But the atmosphere is likely to be far less heated than at the “Boxen beider Basel”. Management and shareholders can look back on a successful financial year.

In 2024, Novartis reaped the rewards of the restructuring: both sales and profits rose more strongly than analysts had expected. Last summer, the industry giant’s share price climbed above the CHF 100 mark for the first time – a level that the large cap was initially unable to maintain. Recently, however, the Novartis share has been feeling its way back towards the three-digit range. Now a kind of “bonus” awaits investors. The Annual General Meeting will vote on a dividend increase of 6.1% to CHF 3.50 per share. If it approves the management’s proposal, the Basel-based group will pay out the impressive sum of CHF 7.158 billion to its shareholders on March 13. In order to benefit from the distribution, the shares must be in the securities account on March 10, 2025. It will be too late one day later, when Novartis will be trading “ex-dividend”.

Mega transfers in series

In any case, the Basel-based company is heralding the start of a superlative dividend season. In absolute terms, Nestlé remains the paymaster – despite an operational dip. On April 16, the food giant’s Annual General Meeting will vote on a 5 centime increase in the profit share to CHF 3.05. If all goes well, Nestlé’s finance department will release a mega-transfer totaling over CHF 7.9 billion eight days later. Roche shareholders will meet on March 25. A distribution of CHF 9.70 per share and non-voting equity security will be proposed to them, 10 centimes more than for the 2023 financial year. At CHF 7.85 billion, the dividend amount falls just short of Nestlé’s profit share.

The generosity of large corporations is not just a Swiss phenomenon. “After
uninterrupted growth in dividend payments in Europe since the coronavirus pandemic, dividend increases are continuing,” says Grant Cheng, Portfolio Manager Dividends at AllianzGI. According to the asset manager’s calculations, the companies included in the MSCI Europe Index will have paid out a total of around 440 billion euros in 2024. For the current year, the experts expect an increase of 4% to around EUR 459 billion. In 2026, the distributions of the more than 400 companies included in the MSCI Europe could approach the half-trillion-euro mark. AllianzGI expects double-digit percentage growth for the coming year.

Dividend region Europe

From an investor’s perspective, it is not only the absolute amounts that are important. The dividend yield must also be taken into account in order to assess the quality of the distributions. Here, too, Europe has nothing to hide. On the contrary: at the end of January 2025, the MSCI Europe had a dividend yield of around 3.1%. At the same time, the
index provider calculated a value of 1.7% for the global stock market barometer MSCI World and 1.3% for its American counterpart. Admittedly: European shares have not been able to keep up with the rally on Wall Street in recent years. This makes the high and steadily rising dividend payments on the old continent all the more important. This is all the more true in light of the current divergence in monetary policy between Europe and the USA.

It is known that the Fed will adopt a wait-and-see approach after the interest rate cuts in 2024. In the meantime, the SNB is likely to loosen its monetary policy further in view of the slowdown in inflation. At just under 2.9%, the dividend yield of the MSCI Switzerland is already around 240 basis points higher than the yield on the 10-year Confederation bond. Across Europe, the advantage of the dividend yield over the 10-year German government bond is significantly smaller at 65 basis points. In the USA, the yield on the 10-year Treasury is even around 3 basis points higher than the dividends paid by the companies included in the S&P 500.

Paymaster in a package

A dividend strategy is therefore particularly interesting for the Swiss equity market in the current environment. There are systematic solutions for investors who do not want to search for the most lucrative “payers” themselves. For more than ten years, the Swiss stock exchange SIX has calculated the SPI Select Dividend 20, an index that includes companies with not only a stable dividend trend but also a solid payout yield. The annual index review takes place every March. The weighting of a share is capped at 15% every three months. It is not surprising that Nestlé, Novartis and Roche are at the capping limit.

The long-term performance of the index, which also includes second-tier stocks such as Galenica, Ems Chemie and Helvetia, is impressive. In the past five years alone, the SPI Select Dividend 20 has outperformed the Swiss Performance Index (SPI) by around 25 percentage points. With the ETF CHDVD ETF, investors can include this selection in their portfolio. iShares physically tracks the SPI Select Dividend 20 Index and passes on the dividends received to the fund holders. The total expense ratio of the ETF, which has a volume of around CHF 4.3 billion, is 0.15% per year.