Investing outside the stock market: These are Switzerland’s secret dividend kings

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Over-the-counter or OTC trading refers to transactions that are not conducted on a traditional exchange. There are 245 companies in Switzerland whose shares are not listed in the SIX but are still available for investment. This trading takes place, for example, at the Berner Kantonalbank or through the Zurich private bank Lienhardt & Partner.

Small-cap trading is probably overlooked by many investors. Wrong. This market also offers quality and opportunities: last year, the “Lienhardt & Partner Nebenwerte TR Index”, which includes 38 unlisted stocks, lost only a good 5 percent despite the market turmoil, thus clearly beating the Swiss Performance Index (SPI) overshadowed. (minus) 16 percent). Additionally, fees on private trading platforms are generally lower than on “major” exchanges.

The Lienhardt & Partner Secondary Values ​​TR Index includes, among other things, the most liquid and largest stocks in the over-the-counter segment. Reflecting the SME landscape, the index attempts to reflect the wide diversity of Swiss sectors. The index is calculated based on paid prices published by the relevant providers.

Stable dividend protects against penalties

However, this year the index is clearly performing worse than the SPI, losing 1 percent. “Companies that paid high dividends in the form of special dividends were particularly punished. “Securities that pay no dividends or have no dividend deferrals or only low dividend yields have also been penalised,” André Spillmann from Lienhardt & Partner Privatbank tells Cash.ch.

On the one hand, you can also bet on fallen angels outside the stock market and speculate that prices will recover. Especially if the dividend yield is high and a redistribution is assumed next year. You can also bet on stocks that are performing well and where you are sure that the distribution policy will be maintained due to solid earnings.

As illustrated by the twenty selected stocks in the table below, most of the companies included in the index are generous dividend payers; Excludes financial stocks. This is sorted in descending order by dividend yield. Lienhardt & Partner submitted the data to Cash.ch.

Bobst Group offers the highest dividend yield thanks to its special dividend. But it will remain an interesting stock in the future and will also impress with its price performance: “The manufacturer of machinery for the packaging industry is likely to have an attractive dividend yield in the coming years,” says Spillmann, with its dividend yield. It calculates 7.9 percent for the fiscal year.

Selection of the best dividend payers from the Lienhardt & Partner Nebenwerte TR Index

Date: Wednesday, September 13, 2023 (Source: Lienhardt & Partner).

Neue Zürcher Zeitung (NZZ) is one of the largest value stocks in over-the-counter trading and, like Bobst, paid a special dividend for the last financial year. “We expect regular dividend distributions in the future,” says Spillmann. This figure is expected to be 4.2 percent for the current fiscal year.

EW Jona Rapperswil, the energy supplier of the city of Rapperswil-Jona, has been considered a reliable dividend payer for years – it currently yields 3.9 percent. Since stocks do not show large price fluctuations, they are considered bonds. Espace Real Estate is a real estate company that invests in the regions of Bern, Solothurn, Aargau, Lucerne and Schaffhausen. Distribution efficiency is 3.5 percent. Dividends are distributed from capital reserves and are therefore tax-free. This practice can probably be continued in the coming years.

Auto AG Holding is a Lucerne-based bus and commercial vehicle operator that is also considered a reliable dividend payer. The company also has a new presence in the hydrogen sector, which brings more synergies in the vehicle business.

There are good reasons to now count on the distribution to be paid next year with these dividend guarantees: The peculiarity of second-tier unlisted shares is that the share registers are closed relatively long before the general meeting (AGM). This usually happens when companies release their annual figures. Share register closings can be found on the SOGC or, in part, on the home page of the relevant company.

Long investment horizon, no trading

“Investors should be aware that an investment in over-the-counter shares is generally a long-term investment,” adds Spillmann. In general, over-the-counter SMEs are well positioned to cope with the slowdown in economic dynamics. This is because, for example, most of the companies in the index are well financed and are not hit that badly by interest rate increases. Only companies with a large real estate portfolio or a high proportion of debt capital feel the negative impact.

But there are headwinds here too: Industrial companies sometimes struggle with price adjustments and supply chain issues. The shortage of skilled workers is also a significant problem and is likely to continue to burden some companies in the future. In addition, the weak situation of export markets such as Germany and China also leaves its mark on some companies.

On the other hand, stability can be found especially in regional banks, such as second-tier stocks, where investors with local ties can park their money for the long term. Zürcher Landbank, Clientis Bank Toggenburg and Acrevis Bank offer distributions above 2.6 percent per annum, as shown in the table below. Securities dealer Bondspartners reported a dividend yield of 4.4 percent following a 5 percent price decline since the beginning of the year.

Date: Wednesday, September 14, 2023 (Source: Lienhardt & Partner).

The same rules apply to investments in the stock market: Investors should look at the company in which they invest. In this way, he can evaluate his risk capacity himself. Companies listed on SIX usually publish a report on business development every three months and generate a lot of news. This is often lacking for unlisted companies, which publish their figures once a year.

Not only that: if you are not registered as a shareholder, in some cases you cannot access the annual report and there are few analyst studies of the shares. Disclosure requirements are also much more limited than for publicly traded securities.

“For very small-cap companies, you should think twice about whether you want to build a larger position,” Spillmann says. At the same time, these companies with low trading volume are mostly hobby stocks with regional or social connections. In these societies, emotions often play a more important role than increasing wealth.

Source :Blick