I recently bought some VEUR.SW on Swissquote for a tilt on European stocks and although this ETF is quoted in CHF it pays dividends in EUR. I simply assumed it would be paid in CHF…
So now my question how to deal with these dividends in EUR… It is somehow confusing to me because the bank account in Swissquote is in CHF and so I guess that EUR amount is a virtual account which I can not see or access directly.
Ideally I would immediately or automatically exchange that EUR amount into CHF to make it usable for my next purchase on Swissquote. Or how do you people deal with that or suggest me to do?
I see, thanks for the details. So before I can use these EUR to buy more ETFs in CHF I will need to exchange them? Or can Swissquote automatically convert them for me when buying more ETFs?
On a more general term: do ETFs always pay out dividends in the currency of their domicile? For example VEUR.SW has Ireland as domicile and Ireland’s currency is EUR.
You are right, I could find the base currency listed on the Vanguard factsheet for VEUR. So that’s another point I need to be more careful of. I find it quite unpractical being paid dividends in EUR. I don’t have much use for EUR so I will have to convert it back to CHF, “loose” 0.95% in exchange fee and then I can use it as CHF…
The base currency determines in what currency the dividends will be paid.
A fund can have different share classes which can be traded in different currencies. This is the case for VEUR, which can be bought in CHF but has EUR as base currency.
Buying share classes of funds with accumulating dividends is a way to avoid the distributions in the base currency. VEUR has accumulating share classes, traded as VWCG (ISIN: IE00BK5BQX27) in CHF on SIX (or with potentially other tickers, in other currencies, on other exchanges):
Edit: alternatively, it is possible to buy shares of the same fund in its base currency with the dividends received, thus holding two classes of shares of the same fund (one in CHF bought with savings and one in EUR bought with the dividends of the first one).
Small clarification, the distributing CHF and EUR shares of the fund are both part of the same share class (same ISIN). I.e., you would be holding two positions of the same share class. The broker can consolidate such positions (i.e. changing the exchange and trading currency without an actual trade) but Swissquote charges CHF 50 for this, if I remember correctly.
Swissquote account is a multicurrency account. Nothing virtual, just all currencies share the same IBAN. Handling EUR dividend is easy, make a SEPA transfer to your Revolut or Wise account and use it from there or exchange.
As mentionned by @Wolverine , there is an accumulated version of your ETF available on SIX (in CHF).
Ticker VWCG
Changing to that ETF would be for sure the easiest and most cost-efficient option in the long term, as you wouldn‘t have to worry about any distributions at all.
That actually makes a lot of sense, especially for holidays abroad in Europe where I should be able to pay directly EUR with Revolut.
Another idea would be to transfer the EUR from Swissquote to IBKR and then exchange the EUR in USD for minimal exchange fee and use it this money along with my regular VT purchase.
Thanks @Wolverine for the hint regarding the VWCG accumulating version of VEUR. I assumed the dividends of VEUR would be paid in CHF that’s why I got the distributing version. As you mention along with others, long term it might simply be easier to switch to VWCG.
Quick question regarding this. My CHF balance is negative due to depot fees but USD positive due to dividends (VWRL), should i move around to balance and avoid fees or…?
The cheapest way is to send the money to IBKR and convert to CHF to buy more shares. Alternatively just switch to IBKR permanently as your broker as they’re both cheaper and more professional than SQ.
So in this thread we concluded that the base currency of an ETF determines in which currency the dividends would be paid. Now I was wondering if this same rule still applies to CHF hedged ETFs?
For example the following corporate bond ETF has USD as base currency but is CHF hedged, does it still pays dividends in USD or would it be in CHF?
You can check ICTax. The distributions are in CHF and this makes sense given that hedging anyway requires a distinct share class. (ICTax also lists one USD dividend but that’s presumably accumulation or capital gain that is taxable, not a distribution).
The total is 6.3% taxable yield for a total performance of 4.1% in 2023. At least in that year, this fund was very tax inefficient.
I simply divided the gross yield from ICTax by the value at the end of the year as approximation. The total performance will still be positive even after taxes. However, it means that you would pay full income taxes on 6.3% despite your total performance being lower. E.g. if your marginal tax rate is 35%, your post-tax total performance would have been 1.9% in 2023 (4.1% - 6.3% * 35%), losing more than half of your performance to taxes.
Thanks I got it now except for how you come up with the 6.3% number? I tried dividing the sum of the yields (last column of ICTax) by the price of this ETF at end of year, this gives me 3.8%.
The total taxable yield is CHF 0.26 per share (the line with the accumulation counts as well). The tax value is CHF 4.11. 0.26 / 4.11 = 6.3%
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