Since the latest dividend round, the shareholders of the 30 most valuable companies on the Swiss stock exchange have become a further 46.6 billion Swiss francs richer. Börsen-Zeitung has published a dividend report from Switzerland every year since 2010, and the statistics show that companies have paid out an average of 4.5% more each year over the past 14 years.

Large long-established companies with mature products, a strong market position and a well-established business model are typically particularly generous and reliable dividend payers. They have the costly development and expansion phase behind them, and are reaping the rewards of these investments. The Swiss economy is richly endowed with mature companies that often occupy leading global positions in their markets.

Thomas Meier, a fund manager at asset management company Mainfirst in Frankfurt, who specialises in investments in shares of high-dividend companies, refers to such companies as „dividend aristocrats“. The Swiss stock market is one of his favourite hunting grounds. And for good reason:

In 2024, the 30 concerns included in the Swiss Leader Index of the Swiss Stock Exchange generated a cumulative profit of just under 66 billion Swiss francs. They distributed almost all of this, if the share buybacks totalling 18.5 billion Swiss francs are added to the dividends. Although the payout ratio is not always this high, it has been well above the long-term average since the financial crisis. This is a clear sign that companies have lost the basic confidence they once had in general economic trends.

Companies invest their profits in new production facilities or in the development of new products if they can reasonably expect more demand. However, if this opportunity is considered to be low, profits tend to be returned to shareholders. In the long term, such behaviour inhibits growth and reduces prosperity, because it reduces the production potential of companies.

Nestlé, Switzerland's largest dividend payer for a long time, has also followed this pattern in recent years. In December 2024, the food multinational completed a share buyback programme worth 20 billion Swiss francs that was launched in 2022. It was the second programme on this scale since the financial crisis.

The shareholders were still not happy. Nestlé has lost its reputation for being able to achieve above-average growth rates in all economic weather conditions. As a result, the stock market value of the Group fell by 63 billion Swiss francs to 193 billion Swiss francs in 2024 – with the side effect that the company also paid far too high prices for the shares it bought back, which led to an additional destruction of shareholder value.

Fund manager Thomas Meier assumes that corporate earnings growth will slow significantly in the deteriorating global economic climate. He therefore expects far fewer share buybacks in the near future. However, Meier does not believe that dividends will be cut on a large scale. „Companies will try to maintain or even further increase their dividends even in difficult times,“ he says, knowing that the reliability of payouts is a determining factor for shareholder loyalty and the stock market valuation of companies. Meier is positive about the banks. „Over the last 15 years, they have been in the dirty corner of the financial market. They have now come out of that.“ He believes that the banks will weather the next recession better than before.

„We owe this not least to stricter regulation. Therefore, from the perspective of the dividend recipient, it is not a tragedy if the banks have to fulfil conservative capital requirements,“ says the fund manager, who of course knows that institutions such as UBS are fiercely resisting stricter requirements. UBS promises its shareholders steadily rising dividends, but also further share buybacks totalling billions. Depending on the development of regulation in Switzerland, it may have to exercise more restraint with share buybacks.

Since the financial crisis, not only shareholders but also managers have been generously rewarded. The average CEO salary of the companies in the Swiss Leader Index rose from 4.7 million Swiss francs to 6.7 million Swiss francs between 2010 and 2024. A record was set in 2024 by Novartis CEO Vasant Narasimhan, who achieved a salary of 19.2 million Swiss francs after an increase of 19%. In the USA, many large companies have long been paying their CEOs more than 20 million dollars a year. In Europe, however, the 20 million mark has so far been a kind of shame threshold.

High CEO salaries are naturally easier for shareholders to digest if their own overall calculation is positive, looking at „shareholder value“ and is made up of the stock market value and distributions (dividends plus share buybacks).

In the case of Novartis, shareholder value fell by 2% in 2024, which hardly promotes acceptance of Narasimhan's salary package. The comparison would be better for Narasimhan if the 2023 spin-off of Sandoz were not seen as a distribution of a dividend in kind, which it actually is. Without the Sandoz spin-off, Novartis would also have achieved an increase in shareholder value.

Géraldine Picaud, CEO of the Geneva-based auditing company SGS, also increased her own salary far more than shareholder value in 2024. Only just enough for an increase in shareholder value was achieved by the private equity specialist Partners Group. Nevertheless, its CEO David Layton has become the second best-paid manager in Switzerland behind Narasimhan with a jump of 141%.

Flavour and fragrance manufacturer Givaudan, on the other hand, provided mutual satisfaction by awarding its CEO a 6% pay rise in 2024 while at the same time increasing shareholder value by 13%. However, the principle of a parallel development of salary and performance is often violated when performance decreases. Executive salaries are also often very inflexible when it comes to downward adjustments, even though executive salaries typically contain a high performance component. Swatch Group CEO Nick Hayek and Urs Gantner from the VAT Group in St. Gallen, which specialises in the manufacture of vacuum valves, are laudable exceptions in this respect. It remains to be seen what will happen to executive pay if the stock market trend turns negative.