Swiss Dividends: Where Quality Meets Consistency

After a period characterized by positive interest rates, the Swiss National Bank has moved its policy rate back to zero in June 2025. Swiss investors are therefore once again scratching their heads to find sufficiently yielding assets without substantially increasing the risk profile of their CHF-denominated portfolios.

The (obvious) case for Swiss dividends

Against this backdrop, Swiss investors have looked at various options to enhance the overall yield of their portfolio. Within “income-focused” strategies, one option that has gathered significant momentum is the addition of Swiss high dividend paying stocks in their core allocation. We identified the following three main reasons explaining the appeal for such strategies:

1) The yield itself

It might sound obvious, but the dividend yields of such strategies are attractive relative to other asset classes as well as the broader equity universe. As you can see in the chart below, the dividend yield of the Swiss stocks universe alone, represented here by the MSCI Switzerland IMI index, is significantly above the yield of well-established CHF Bonds segments.

CHF Bonds yield vs. MSCI Switzerland IMI dividend yield

Past performance is not a reliable indicator of future results. Bar chart: MSCI IMI yield (2.91%) is significantly higher than yields of SBI AAA-BBB, Corporate, and Government bonds.

2) Defensive characteristics

While uncertainty remains with regards to the economic outlook, carefully selected dividend-paying stocks have historically exhibited defensive properties, which can prove useful in a broad asset allocation context.

3) Dividend growth

The headline dividend yield figure is of course important, but the dividend growth factor is also key in order to select high dividend paying stocks with a sustainable and robust dividend policy. In addition, adding quality screens to enhance the stock selection leads to a more well-balanced portfolio from a risk factor perspective.

How to select quality dividend paying stocks?

Within the indexing space, there are in essence two well-established ways of creating a dividend index: either through a high-dividend concept, where the key objective is the selection of the highest dividend-paying stocks, or through a dividend growth strategy which focuses on the companies with a well-established track record of growing dividends.

However, a strategy that would naively maximize its yield can be exposed to so called “yield traps”. The industry has therefore leaned towards solutions that are also taking into account the steady growth of dividends. One of those approaches is the High Dividend Yield concept from MSCI, which applies the following checks to enhance the index construction:

Dividend sustainability screens to exclude stocks with extremely high or negative payout, as well as screening out high dividend yielding companies as a result of a plunging stock price without fundamental support
Dividend persistence screen to exclude stocks lacking a strong historical track record of consistent dividend payment
Quality screens to avoid selecting stocks with low valuation paired with weak balance sheets (i.e. so called value traps)

Does the approach work on Swiss Equities?

By applying the MSCI High Dividend Yield approach to the MSCI Switzerland IMI universe, one can achieve its objective of selecting quality dividend paying stocks while also meeting a primary objective of maximizing the yield of a portfolio. More concretely, going back to the three points highlighted at the beginning of this article, let’s see if the characteristics of this resulting portfolio ticks all boxes:

1) Yield improvement

Starting with the dividend yield, we can see that applying the approach on this investment universe leads to a substantial increase in yield, with the resulting portfolio averaging 4.6% over the observed period.

Index	Index	MSCI Switzerland IMI	MSCI Switzerland IMI	MSCI Switzerland IMI High Dividend Yield Index	MSCI Switzerland IMI High Dividend Yield Index
Index	Current dividend yield	MSCI Switzerland IMI	2.91%	MSCI Switzerland IMI High Dividend Yield Index	3.69%
Index	Monthly average dividend yield	MSCI Switzerland IMI	3.0%	MSCI Switzerland IMI High Dividend Yield Index	4.6%

2) Defensive characteristics

While we ought to remain cautious on drawing any conclusions about these observations, below drawdown chart seems to indicate that the High Dividend Yield strategy has generally provided downside protection during historical drawdown periods, with the notable exception of the COVID-19 pandemic downturn.

Line chart 2015–2025: High Dividend Yield Index shows smaller drawdowns than MSCI IMI, except during the COVID-19 crisis.

3) Quality factor exposure

Finally, when looking at the factor exposure of the starting universe and of the High Dividend yield index (see below), we can notice that while it has a natural overexposure to Value, it also has a positive tilt towards the Quality factor, which would likely not be the case without the screening of companies with sub-par quality characteristics.

MSCI FaCS is a standard method for evaluating and reporting the Factor characteristics of equity portfolios. Factor exposures of MSCI Switzerland IMI High Dividend Yield and MSCI Switzerland compared across 8 factors.

An ETF to systematically meet your objectives

We’ve established how a systematic rules-based approach can be applied on the Swiss stocks universe to select quality high dividend paying stocks to enhance the yield of investors’ portfolios. Thanks to our UBS MSCI Swiss Dividend ETF, listed on the SIX Swiss Exchange, investors can now access such a strategy in an easy and cost-efficient way.

More about this ETF

Opportunities

The UBS MSCI Swiss Dividend ETF offer exposure to high dividend paying stocks within the MSCI Switzerland IMI index by tracking the MSCI Switzerland IMI High Dividend Yield index.
The fund generally invests in equities contained in the parent index. The relative weightings of the companies differ from their weightings in the parent index.
The fund is passively managed.
Clients benefit from the flexibility of an exchange traded investment.
Provides access to the performance of the index with a single transaction.
Optimized risk/return profile thanks to a broad diversification across a range of countries and sectors.
The fund offers a high degree of transparency and cost efficiency.

Risks

The UBS Exchange Traded Fund invests primarily in equities, which are included in respective index.
For this reason, an investment horizon of at least five years and corresponding risk tolerance and capacity are required.
All investments are subject to market fluctuations.
Every fund has specific risks, which may significantly increase under unusual market conditions.
Changes in currency exchange rates may have an impact on fund value.
The fund’s assets are passively managed. As a result, the net asset value of the fund is directly dependent on the performance of the underlying index. Losses that could be avoided via active management will not be offset.

Any decision to invest should take into account all the characteristics or objectives of the promoted fund as described in its prospectus, or similar legal documentation.

For complete information about the fund, including the risks of investing, applicable fees (e.g. entry or exit fees) and other important information, investors prior to investing should read the Key Investor Information Document (KIID), full prospectus, the complete risk information and any applicable local offering documents. Please refer to your adviser for more information.

Source: UBS Asset Management. September 2025.

Glossary

Benchmark: Reference parameter (e.g. a share index or an index portfolio) used to compare the performance of a portfolio. A benchmark that is an index is also called a reference index.

Core Portfolio: The Core Portfolio is that part of the portfolio of a (dynamic) capital preservation fund that serves to ensure that the capital is preserved. Investments are generally in money market instruments and bonds in the fund's reference currency.

Dividend: is a distribution of a portion of a company's earnings, decided by the board of directors, to a class of its shareholders

Dividend indices: Dividend indices follow strict rules in order to safeguard exposure to higher-than-average yielding dividend stocks

Dividend yield: The return that the annual dividend of a share represents in relation to the current share price. Calculated by dividing the annual dividend per share by the current market price.

Dividend-focused strategy: weights selected stocks according to their dividend yields, i.e. higher yielders receive a higher allocation, with the intention of harvesting dividends

ETF: Exchange traded fund – a relatively new technique evolved from passive investment. Instead of buying a unit in a tracker fund, investors can “buy” an index in the form of units which are traded on a stock exchange. The price of these units depends on the prevailing market price.

Income: Interest and dividends

Risk: Exposure to damage or financial loss, e.g. a fall in the price of a security, or insolvency on the part of a debtor.

Value stocks (High yield stocks): Featuring above-average dividend yields and low price-to-book ratios

Volatility: Measure of the fluctuations in the rate of return of a security within a specific period.

Yield: A measure of the income return earned on an investment. In the case of a share the yield expresses the annual dividend payment as a percentage of the market price of the share. For real estate, the yield is the annual rental income as a percentage of the capital value of the asset. For bonds the running yield (or flat or current yield) is the annual interest payable as a percentage of the current market price. The redemption yield (or yield to maturity) allows for any gain or loss of capital which will be realised at the maturity date.

More explanations of financial terms can be found at ubs.com/am-glossary