Supercharge your dividend yield: a smart strategy with Lombard Loan

In today’s uncertain market, income remains a powerful tool to smooth returns and build wealth. For investors already using a Lombard Loan—or considering it—a strategic opportunity exists to amplify dividend income without disrupting your long-term equity holdings.

For illustration purposes, let’s walk through how it works using Sunrise, one of Switzerland’s well‑known telecom and dividend‑paying companies.

The scenario: boosting yield with a Lombard Loan

Imagine you have CHF 5,000 in available capital and already have an active Lombard Loan account. You want to buy Sunrise, which currently offers a 12‑month dividend yield of around 7.16%.

With Sunrise shares offering 75% collateral value, you can use CHF 5,000 to purchase up to CHF 20,000 worth of Sunrise stock. But let’s say you take a slightly more conservative approach and opt for 3x leverage instead – using your CHF 5,000 and borrowing CHF 10,000 via a Lombard Loan at a 3% interest rate to buy a total of CHF 15,000 worth of Sunrise stock.

Here’s how the math works:

• Total Sunrise shares bought: CHF 15,000 worth
• Annual dividends received: CHF 1,074 (7.16% on CHF 15,000)
• Interest cost: CHF 300 (3% on CHF 10,000)
• Net dividend income: CHF 774

This approach allows you to turn Sunrise’s already solid dividend into an enhanced income generator, using a Lombard Loan as a strategic enhancer.

Why it matters

• Keep core equity exposure: You're not selling down holdings—you’re adding to income potential.
• Work your capital harder: A Lombard Loan lets your francs do more without injecting more cash.
• Take advantage of stable dividend payers: Telecom companies like Sunrise, with reliable payouts, are ideal candidates.

What to watch: the risks

While the math is compelling, a Lombard Loan is not free money. Here are a few important caveats:

• Dividend cuts: A reduction in Sunrise’s payout could reduce or eliminate the income cushion.
• Share price risk: If the price drops significantly, you may face margin calls or need to top up your account.
• Interest rate hikes: Higher borrowing costs can erode your yield spread.

This is a strategy best suited for experienced investors who monitor their portfolios and are comfortable with short‑term volatility.

Final take

For income‑seeking investors already using a Lombard Loan—or thinking about it—this is an opportunity to rethink your capital efficiency. Used wisely, it’s a way to supercharge your dividend strategy while staying invested in quality stocks like Sunrise.