Wednesday, 3 April 2024 Reading time : 2 minutes

Companies around the world have paid out a record amount to their shareholders last year. According to a study by asset manager Janus Henderson, a total of USD 1.66 trillion in dividends were returned to investors in 2023. This represents an increase of 5.6% compared to 2022. This year, the investment company expects dividend payments to rise further to more than USD 1.7 trillion (+3.9%).

For investors pursuing a dividend strategy, this starting position seems promising. However, simply choosing the stocks that offer the highest dividend may not be the best approach. Rather, a reliable and sustainable distribution policy is crucial. 

This is illustrated by a study by Wellington Management and Hartford Funds, which analyses the performance of S&P 500 companies in relation to the dividends paid. The analysis covers the period from 1930 to 2023. It shows that investing in the equities of the highest dividend payers (top 20%) did not produce the highest total returns over the decades. Stocks that paid high, but not the highest, dividends performed as well or better.

According to the analysts, this can be explained by the fact that high dividend payments are not always sustainable. One critical metric is the payout ratio, which puts the dividend payment in relation to earnings per share. The higher the ratio, the higher the proportion of earnings the company is using to pay a dividend. Accordingly, there is less left over to finance investments that will pay off in the future. While the most generous dividend payers spent a relatively high proportion of their profits on dividends, with a payout ratio of 75%, the ratio for the more moderate companies was much lower at 41%, as the study shows.

Investment solution
The tracker certificate from Zürcher Kantonalbank provides simple and efficient access to a global dividend basket. The equity selection is made up of companies with limited risk of dividend cuts and defaults. To reduce stock-specific risk, the selection is diversified across sectors and geographical regions. 

The basket is composed of twenty stocks, each with a 5% weighting. The average dividend yield at the time of selection is 6.50%. The maturity is three years.

Termsheet CHF (Valor 121 825 077)
Termsheet EUR (Valor 121 825 091)

Subscription period until 11. April 2024.

 

Disclaimer
This communication is for marketing purposes. It is neither an offer nor an invitation to submit an offer, to purchase or to subscribe to securities and does not constitute investment advice. You should consult your advisors before making an investment decision.
Forward-looking statements are subject to known and unknown risks, uncertainties and other factors that may cause the actual results, financial condition, development or performance of the issuer to be materially different from any future results, financial condition, development or performance expressed or implied by such statements.
The present document has not been drawn up by the research department as defined in the rules of the “Directives on the Independence of Financial Research” published by the Swiss Bankers Association, hence these rules do not apply to this document.
If securities are mentioned in the communication, the base prospectus, the final terms and any key information document may be obtained free of charge from Zürcher Kantonalbank, Bahnhofstrasse 9, 8001 Zurich, VRIS, and from www.zkb.ch/finanzinformationen.