Eastern Europe: History… Culture… And Superb Investment Yields

Eastern Europe has grabbed its fair share of international headlines recently.

Unfortunately, due to Russia’s invasion of Georgia, many of them have come for the wrong reasons.

If you look past the mainstream doom-and-gloom, though, what you’ll find is a region full of much brighter opportunities for savvy investors. And as the difficulties in Georgia get pushed into the past, the world’s focus will once again shift away.

But that’s normal – Eastern Europe is usually overlooked by the developed world anyway. Here’s how to separate yourself from the crowd and become a smarter investor…

The Prestigious Jewels In Eastern Europe’s Crown

Eastern Europe has long intrigued sophisticated travelers (and investors).

Take the region’s crown jewels, for example:

-Prague, capital of the Czech Republic, whose history spans 1,100 years and is home to some of the most famous and expensive art in the world.

-In Poland, Warsaw, which was razed to the ground in World War II, arose from the rubble and now boasts one of the tallest cityscapes in Europe.

-In Bulgaria, you can view charming Alpine summits in the Balkan Mountains, to the picturesque Black Sea shore. And its capital city, Sofia, is home to one of the most striking Orthodox cathedrals in the world.

Free From The Soviet Stranglehold, Eastern Europe Finally Flashes Its True Potential

While under Soviet control, Eastern Europe’s considerable potential was left untapped. Stifled by the inefficient Communist state, the region lay economically dormant.

But when the Berlin Wall fell in 1989, it sparked hope. Still, in a region with thousands of years of memories, progress can be a little slow. A full fifteen years passed between the release of the Soviet chokehold on Eastern Europe and Poland’s entry into the European Union.

Once that happened, however, many of Poland’s neighbors followed suit. Bulgaria and Romania joined the federation last year and Slovenia held the international body’s rotating presidency until the end of June.

Today, it seems the Eastern European slumber is over for good. The region is awake and its residents are serious about catching up to the West. Eastern Europe is growing ever more vibrant and the best part for us is that it offers a remarkable – if still widely overlooked – investment opportunity.

In short, serious investors simply can’t afford to overlook these countries any longer. After all, they can bring strong returns to your portfolio – and not only that, put hefty double-digit dividends in your pocket along the way, too.

Sizzling GDP Growth

One quick way to gauge the region’s potential is from its GDP growth. As the old adage goes, “A rising tide usually lifts all boats.” And Eastern Europe’s tide is certainly living up to that.

At 10.3%, the GDP growth in Latvia rivals China. And at least eight other Eastern European countries exceed the world’s average 5.2% annual GDP growth rate. By contrast, the U.S. economy lags by several percentage points.

As you can see on the chart below, these favorable economies have fueled the absolutely sizzling market performance in Eastern Europe for the past five years. The Czech Republic market has surged 232.6% in U.S. dollar terms over that time, while Poland’s market enjoyed an outstanding 217.3% jump. And Latvia, even with its stellar GDP growth, was a relative underperformer, having increased “only” 90.8% for Stateside investors.

And the S&P 500? It notched a mere 29.1% advance over the same period.

USA vs. Eastern Europe

Clearly, if you’re concentrating your investments on U.S. companies, you cannot reasonably expect to mirror Eastern Europe’s triple-digit returns. The U.S. simply doesn’t have the growth to power that sort of market performance.

Even if you exclude all other factors, U.S. growth is limited by the current inertia of the world’s largest economy. By contrast, it’s easier for a smaller, underdeveloped country to grow – and maintain a relatively high growth rate for years – than it is for a large, mature economy like the U.S.

And current forecasts show that trend is likely to continue over the long-term. Across Eastern Europe, GDP growth is greater than 5%, while it’s less than 2% in the U.S.

Take a look at the 2008 GDP growth forecasts…

These projections certainly 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.

Eastern Europe Wants Your Investment… And Is Prepared To Pay You To Get It

And in addition to strong economic growth, the dividend payouts from the region’s companies are far higher than we see in the U.S.

-Take Estonia, for example, which has an average dividend yield of 5.1% – more than twice the S&P 500.

-Elsewhere, Poland boasts a 4.5% average dividend yield, while Czech Republic’s average is 4.4%.

The bottom line is this: Eastern Europe wants to attract international capital – and is willing and able to pay for it, as it seeks to finance its continued expansion

Some folks shy away from investing in Eastern Europe, due to the sometimes complicated, time-consuming and expensive nature. 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, I added shares of an ETF focused on this profitable and promising region to my “Ultra High-Yield” Portfolio in July. It’s 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 crème de la crème of Russia and Eastern Europe, with each region representing half the portfolio. I’d like to offer this same recommendation to you that I did my High Yield International newsletter subscribers – and I’d like to you to get on board, too by giving you the name of this ETF.

Until next time…

Nick Lanyi
Smart Profits Report