|
Russia has, of late, been grabbing international
headlines. When the difficulties in Georgia are
settled and the world's focus eventually shifts, it likely
will be to the West or to the Persian Gulf, to Africa or
even South America.
Eastern Europe is usually overlooked.
That might be less true in an Olympic year: The medal
count shows that these little-known countries from a
forgotten region are fierce competitors. Romania,
Poland, Slovenia and Bulgaria have all fielded gold
medal-winning athletes. Without the summer games in
Beijing, though, it's likely these countries would remain
out of sight and out of mind.
Sophisticated travelers have long been entranced by the
area's charms. The Czech Republic capital of Prague,
whose history spans 1,100 years, is Eastern Europe's jewel.
The city has been an international cultural center since the
Holy Roman Emperor Rudulf II chose it as his home in the
late 16th century. Warsaw, which was razed to the
ground in World War II, literally rose out of the rubble to
become one of the tallest cityscapes in Europe. Bulgaria is
charming from its Alpine summits in the Balkan Mountains to its
pleasant Black Sea shore. Sofia, its capital, is home to one
of the most striking Orthodox cathedrals in the world.
Eastern Europe's potential was -- to put it mildly --
untapped under Soviet control. The region lay economically
dormant, stifled by an inefficient communist state.
The toppling of the Berlin Wall in 1989 sparked hope, but
progress is slow in a region with a thousand-year memory.
Fifteen years passed between the release of the Soviet
chokehold on Eastern Europe and Poland's entry into the
European Union. Many of its neighbors followed suit.
Slovenia held the international body's rotating presidency
until the end of June. Bulgaria and Romania joined the EU only last year.
But this is an investment newsletter, not a travelogue.
The Eastern European slumber is over for good. The region is
awake, and its residents are serious about making up lost
ground and catching up to the West. Eastern Europe is
growing ever more vibrant, and it offers a remarkable -- if
still widely overlooked -- investment opportunity. You
simply can't afford to overlook these countries any longer.
They can bring serious returns for your portfolio -- and put
hefty double-digit dividends in your pocket along the way.
Strong GDP Growth
One quick way to gauge the
region's potential is its economic growth -- a rising tide
lifts all boats. Eastern Europe has some real achievers in
this regard: At +10.3%, the rate of growth in Latvia rivals
China. In addition, at least eight other Eastern
European countries exceed the world's average +5.2% annual
growth rate -- a measure the United States lags by a several
percentage points.
These favorable economies have fueled sizzling market
performance in Eastern Europe for the past five years.
Poland saw a rise of +254.5% in that time. The Czech
Republic rose +322.7%. And Latvia, with its stellar
GDP
growth, is a relative underperformer, having increased
only +119.5% -- surely it has yet to do some real
broken-field running.
The S&P? It notched a mere +30.7% advance in the
same period.
Eastern Europe also includes Russia, and that region's
rich mineral resources are powering hefty dividend payouts.
Smaller Eastern European countries know they have to pony up
to attract foreign investment -- which is the only way this
region will continue its dynamic upward trend.
Clearly, if you're concentrating your investments in
U.S. companies, you cannot reasonably expect to mirror these
triple-digit returns. We simply do not have the growth here to
power that sort of market performance. It won't happen.
It can't happen ...
Even if you exclude all other factors, U.S. growth is
limited by the inertia of the world's largest economy.
In other words, it's easier for a smaller, underdeveloped
country to grow -- and to maintain a relatively high rate of
growth for years -- than it is for a large, mature economy like
the United States.
History bears this out: The S&P hasn't led the league
in 60 years.
Current forecasts show that trend is certain to continue.
The S&P will be lucky to end the year in positive territory.
Growth is greater than +5% across Eastern Europe and less
than +2% here at home.
Consider the 2008 growth forecasts:
|
Country |
Est.
2008 GDP Growth |
|
Lithuania |
+5.5% |
|
Bulgaria |
+6.1% |
|
Poland |
+5.4% |
|
United States |
+0.8% |
|
|
Country |
Est.
2008 GDP Growth |
|
Romania |
+6.0% |
|
Slovenia |
+4.5% |
|
Russia |
+7.5% |
|
Ukraine |
+6.2% |
|
These projections look less than rosy for the U.S., but
there is a glimmer of hope. Why? Because growth in Eastern Europe is expected to continue, even
as we struggle in the States. That means you still have
time to profit from Eastern Europe's good fortune.
In
addition to strong growth, the payout is far higher. Estonia,
for example, has an average dividend yield of 4.9% -- more
than twice the S&P. The Czech Republic average is 3.8%;
Poland 3.3%. The list goes on: Eastern Europe wants to
attract international capital and is willing and able to pay
for it.
Now, investing in Eastern Europe can be complicated,
time-consuming and expensive. But it doesn't have to be any
of those things. We've found an exchange-traded fund
that does all the legwork in bringing these companies to
you. In fact, ETFs let you access these markets on the New York Stock Exchange.
I added shares of an ETF focused on this profitable and
promising region to my "Ultra High-Yield" Portfolio in July, a portfolio
that's available only to subscribers of my premium
High Yield International newsletter.
This ETF is not
only positioned in a high-growth market and poised to
deliver double-digit gains, it's also paid an astonishing
25.2% in dividends and short-term capital gains. (Long-term
gain distributions juice the return even further.) The fund's 44 companies are the creme de la creme of Russia and Eastern Europe, with each region
representing half the portfolio.
To learn the name of this ETF and have access to the rest of
the High-Yield International portfolios, go
here.
Thanks for joining me on my search for today's
highest-yielding securities!
Nick Lanyi
Co-Editor
Global Dividend Opportunities
GlobalDividends.com
839-K Quince Orchard Blvd.
Gaithersburg, MD 20878-1614
P.S.
-- Don't miss a single issue! Add our address, Editors@GlobalDividends.com,
to your Address Book or Safe List. For instructions, go
here.
|
Printer-Friendly
