Mattias Wallander, founder and analyst at Enlight Research

The highest yielding stock in the Baltics

The company Enlight Research, which analyzes publicly listed companies in the Baltic states, has ranked this year's companies with the highest dividend yield.

Eleving has been listed almost one year which means investors have seen two quarters (Q4/25, Q1/25) and the 2024 annual report. The current share price of EUR 1.68 is 1% below the EUR 1.70 IPO price. However, adjusted for the EUR 0.13 per share dividends paid from 2024 year’s profit, the return for IPO investors is positive 6%. This can be compared to the Baltic Benchmark Index return of 14% since the Eleving IPO on 16 October 2024. The lag versus the index is hard to explain as the promises made at the time of the IPO have been fulfilled.

For example, the 2024 reported loan book growth of 16% was above the mid-point guided range of 5-20%. Furthermore, the analysts’ estimated 2024 dividend yield of around 7.5% was also pretty much fulfilled with an actual yield of 7.3% based on the IPO price. The sideways share price development might be explained by an expected dividend yield decline in the years to come, but this is not the case. For example, Enlight Research expects a dividend of EUR 0.14 per share this year, implying a yield of 8.5% based on the current share price. This means it is the highest yielding stock on the Enlight Research website where all major Baltic stocks are covered with estimates. Interestingly, a similar company, DelfinGroup, is the second highest yielding stock with an estimated 2025 yield of 8.3%.

Source: Enlight Research

*Lithuanian companies adj. for 15% dividend withholding tax.

Misunderstood

One reason for the lack of share price appreciation could be that investors think of Eleving as a Baltic company and miss the company’s significant exposure to high growth regions such as Africa and the Balkans. While the headquarters, IT development, and other key central functions are in Riga, only about 10% of the revenues come from the Baltic countries. This means the somewhat sluggish Estonian and Latvian economies have limited impact on revenues. With roughly 40% of revenues from the Balkan region and around 35% from Africa, the high loan growth is easier to understand. For example, the GDP growth in countries where Eleving operates in Africa is around 4% and the GDP per capita is just USD 6.5K (USD 36K in Baltics).

Another factor investors might not fully understand is that unlike banks, Eleving is not very dependent on the Euribor rate. For example, consumer loans lending rates are pretty much fixed throughout the economic cycle as they are not priced according to Euribor plus a margin. This means the lower Euribor seen this year has not hurt Eleving’s net interest margin. It might even have a positive effect if the corporate bond interest rates come down because of lower Euribor rates. To put it simply, Eleving borrows money from investors by issuing bonds and lends this money to private individuals (the spread between the bond interest rate and the lending out rate is the margin).

Hot bond market both good and bad

The Baltic corporate bond market is hot; some might even say there is a risk of a bubble. In May alone, EUR 262m in corporate bonds was issued. The strong demand for bonds is positive for Eleving as it makes it easier to source capital for its loans. On the other hand, an attractive bond yield might result in investors buying the Eleving bond rather than the Eleving equity.

Currently, the yield-to-maturity on Eleving’s bonds is around 9%, which is on par with the estimated average dividend yield of 9% for 2025 and 2026. The situation could change quickly as the strong bond demand is likely to result in lower bond yields, meaning the equity yield could soon be higher than the bond yield.

The average yield of the five highest yielding bonds issued in May this year was 10%, which is just one percentage point above Eleving’s estimated average dividend yield of 9%. In the secondary market, the average yield-to-maturity of the five highest yielding corporate bonds is 7%, meaning it is already lower than Eleving’s dividend yield. Furthermore, if the share price starts to gain momentum, some investors might find the share price appreciation potential attractive.

Valuation

Eleving’s estimated 2025 ROE of 29% is on par with DelfinGroup and accordingly, the P/BV of 1.8x is also in-line DelfinGroup. Looking at traditional Baltic banks and their respective P/BV and ROE, it appears LHV is overvalued with a P/BV of 1.8x and a ROE of 18% i.e., much lower than Eleving’s and DelfinGroup’s. Of course, traditional banks and consumer lenders are not fully comparable as the product offer and risk profile differs. Nevertheless, the P/BV to ROE relationship gives a good overall valuation indication – at least we can conclude that Eleving’s 1.8x P/BV is not outrageous in relation to LHV’s and DelfinGroup’s.

Looking at the analysts’ reports, Enlight Research Base case Fair value per share for Eleving is EUR 2.39, while Warburg Research and LHV have a target price of EUR 2.60 and 2.35, respectively. The average of these three is EUR 2.45, implying an upside of over 40% compared to the current price of EUR 1.68.