While inflation has gone up everywhere since 2020 due to supply chain issues, COVID-19-related fiscal programs and the Ukraine war, Central and Eastern Europe (CEE) has been hit particularly hard. The Baltic countries Lithuania (24.1%), Estonia (23.7%) and Latvia (22.2%) lead the ranking of those with the highest inflation rate in the EU. In the main CEE economies Poland, Czechia and Hungary, inflation reached 17.9%, 18% and 20.7% respectively in September 2022. Over the last quarters, their central banks have increased interest rates from almost zero to 6.75%, 7% and 13% respectively. This means that in all these countries real interest rates have become strongly negative and money expensive, which is bad especially for real estate and growth stocks.
Given that the end of the interest rate increases is not in sight, which makes investments in bonds still risky, the best choice for investors seem to be fundamentally strong dividend-paying companies with reasonable net gearing. Below is a list of stocks from the CEE region with a long history of dividend payouts. The two companies with the longest track record of uninterrupted dividend distributions are the Hungarian and Slovenian pharma wholesalers Gedeon Richter (www.gedeonrichter.com/en) and Krka (www.krka.biz). They only have a net gearing of 3.4% and -11.8% respectively and are trading at P/E 2022E ratios below 10x. The stocks, which currently offer the highest dividend yield, are the Romanian natural gas producer Romgaz (12.2%, www.romgaz.ro) and the Polish manufacturer of aluminum products Grupa Kety (10.8%, www.grupakety.com).
All of the companies below can also be traded on a Western stock exchange e.g. in Frankfurt.
|Company (Industry)||Market cap (EUR)||FCF Yield so far in 2022||Net income CAGR (3y)||DYield 2022E||Years of consecutive dividend payments|
|Asseco Poland S.A. (Software)||EUR 1210m||20%||12%||4.8%||16 years|
|Richter Gedeon Rt. (Pharma)||EUR 3648m||3.2%||58.1%||3.5%||28 years|
|Krka d.d (Pharma)||EUR 2779m||-5.9%||21%||6.6%||23 years|
|Grupa Kety S.A. (Aluminium Industry)||EUR 987m||1.5%||30.4%||10.8%||13 years|
|Asseco South Eastern Europe S.A. (Banking & Payments Software)||EUR 460m||3.6%||32.5%||4%||13 years|
|Ambra S.A. (Alcoholic Beverages)||EUR 106m||1.5%||16.3%||4.8%||14 years|
|Budimex S.A. (Construction)||EUR 1274m||7.8%||47.1%||7.4%||14 years|
|SNGN Romgaz SA (Natural Gas Producer)||EUR 2945m||26.6%||11.9%||12.2%||9 years|
|Mo-Bruk S.A. (Waste Management)||EUR 216m||11.4%||77.6%||10.8%||4 years|
|Cyfrowy Polsat S.A. (Telco & Media)||EUR 2305m||55.3%||74.2%||6.4%||4 years|