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…

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

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…

Country Est. 2008 GDP Growth Lithuania +5.5% Bulgaria +6.1% Poland +5.4% United States +1.7%

Country Est. 2008 GDP Growth Romania +7.0% Slovenia +4.5% Russia +7.5% Ukraine +6.2%

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.

Source: Eastern Europe Proves That High Growth And High Income Are Still Possible

Why China And India Are The Worst Places For Income-Seekers

If you’ve picked up a newspaper, or followed the business headlines over the past few years, then you’re no doubt familiar with the biggest theme in global economics these days: The tremendous boom in China and India.

Thanks to globalization, increased free trade, and a hunger for low-cost labor, both countries have enjoyed outstanding GDP growth rates over the past decade. For example, China’s GDP rose 11.4% in 2007 and is expected to jump another 10% this year. Meanwhile, India’s economy expanded 8.9% last year and should continue to churn ahead at an 8.4% pace this year.

It’s easy for investors to get excited about these countries because the potential is real, and their phenomenal growth should continue for years, if not decades. But there’s a problem…

If you’re an income-seeking investor, then China and India are terrible places to search for high yields. For the most part, companies in these two emerging markets pay little or no dividends because they’re too busy re-investing cash into their businesses, or acquiring competitors, as they strive to keep up with the surging economy.

So how can income investors take advantage of economic growth, yet still lock in solid dividend yields? The answer is simple: Invest in other Asian countries that are directly benefiting from the economic boom in China and India.

There’s An Asian Boom… But It’s Not Just China And India

While China and India may grab the bulk of the headlines, stocks in surrounding nations like South Korea, Japan and Singapore have also delivered very strong returns in recent years. The table below tells the tale – and the same phenomenal growth story applies throughout the rest of Asia.

The question is: Where can we find the best dividend-yielding stocks?

Singapore Swing

While the pickings are slim when it comes to high-yield stocks in China and India, the solid economic growth across the region means surrounding companies are generating strong cash flows – cash they’re returning to shareholders in the form of high-quality, steadily-growing dividend payments.

And the best destination? Although there are a number of promising Asian nations, one of my favorite high-yield hunting grounds is Singapore.

Singapore is a tiny city-state, made up of 63 islands, but with a geographic size of just 272 square miles. It has a population of less than five million – less than half the size of Los Angeles.

But while it masquerades as a geographic midget, in reality, it’s an economic giant. It’s also one of the most business-friendly and efficiently run nations in the world. It’s also a developed market that boasts a high standard of living. On a GDP per capita basis, Singapore ranks above such countries as Spain, Portugal, and Greece and just behind Italy, Australia, and Canada.

A Hub For Finance And Shipping… With Eased Labor Laws And Low Taxes

Early on, the Singapore government recognized that it couldn’t compete with China on manufacturing labor costs. Nor can it compete with India on price for certain services.

Instead, Singapore re-focused its economy on high value industries such as financial services and technology. As a result, the country has become a key banking and financial services center within Asia, and it remains one of the highest-volume currency-trading centers in the world.

And Singapore is taking steps to make sure it maintains its competitive edge. It’s eased the labor laws, making it easier for workers to emigrate there. Singapore has also enacted legislation to reduce its corporate tax rate to 18%, starting with the 2008 tax year. That means its taxes will soon be among the lowest in the world.

Meanwhile, Singapore’s enviable position at the intersection of various shipping routes has made its port one of the world’s busiest over the past 300 years. As a result, Singapore’s so-called “entrepot” industry – duty-free importing and exporting out of the same port facilities – gives the nation a significant source of income. And Singapore’s close proximity to fast-growing Asian markets like China means it’s one of the biggest beneficiaries of booming Asian trade.

The New Real Estate King

As the once-sizzling U.S. real estate market comes to a grinding halt, Singapore’s real estate industry is in the midst of an incredible expansion.

With limited space, developers have constructed thousands of new homes, but values have still shot through the roof, as demand has outstripped supply. The same scenario has also unfolded in the commercial real estate market for office and industrial space.

With such a strong foundation, it’s no surprise that Singapore’s economy is soaring. GDP growth has climbed by 6.8% annually over the past four years, with 6.5% growth expected in 2008. That’s faster than almost every other developed economy in the world.

And that strength is reflected in the country’s stock market, which has delivered robust returns. In fact, Singapore has been one of the world’s best-performing markets over the past five years.

As you can see on the chart, the MSCI Singapore Index has skyrocketed over 200% since 2003, churning out annualized gains of 27.6% and trouncing the S&P 500 by a 3-to-1 margin. I expect Singapore to continue outperforming the U.S. in the coming years thanks to the implementation of business-friendly reforms, as well as strong demand for exports to China.

Capturing Above-Average Yields In Singapore

The reasons to invest in Singapore are already compelling. But aside from strong economic growth and the other factors mentioned above, the nation also offers high dividend yields.

For example, the average Singapore stock now yields about 3.5% – nearly twice the level seen in the U.S. And remember, that’s just the average. Many stocks in Singapore are actually dishing out yields of 6%… 8%… even 10% or more.

I believe the income-based opportunities in Singapore, as well as several other attractive nations in Southeast Asia, are now so good that I highlighted them in the most recent issue of my newsletter, High-Yield International.

I went in search of high yields in Singapore and profiled some of my favorite high-yield picks in the region, including a fast-growing company that is scooping up some of Singapore’s most valuable real estate. Thanks to strong economic growth, real estate prices and rental rates are booming, helping this firm deliver 49% revenue growth and an impressive 9% dividend yield.

If you’d like to learn the name of this high-yielding Singaporean real estate play – plus receive a steady stream of foreign stocks, funds and other investing ideas with high dividend yields each and every month – then consider this my personal invitation to you to try my international investing newsletter, High-Yield International. Visit this link to learn more.

Nick Lanyi
Editor, High-Yield International