CEZ: 9% Dividend Yield Worth Considering

Nov. 22, 2016 10:26 AM ETCEZ, a. s. (CZAVF)10 Comments
Simon Kostrava profile picture
Simon Kostrava


  • Dividend yield 9.69% in 2016 and 7+% yield in following years.
  • Strong cash flow and approved dividend policy with 60 to 80% payout ratio.
  • Risks are outweighed by additional reward coming from FX exposure.

It is always worthy to look to emerging markets when you look for additions to your dividend portfolio. You can find nice company running great business generating lot of cash which they pay to shareholders there. Ceske Energeticke Zavody a.s. (or shortly CEZ OTCPK:CZAVF) is one of them. Dividend yield 9+ percent usually justify a deeper look into any company, so let me have a look on CEZ.

Business Fundamentals

CEZ is integrated electricity conglomerate with operations in Central and Southeastern Europe and Turkey, with headquarters in Prague, Czech republic. It generates, trades and distributes power and heat. Their main focus lies in the Czech Republic, where CEZ makes approximately 74 percent of revenues. Moreover, Czech republic (via Ministry of Finance) is also the main shareholder of a company with 69,78% share. Therefore Czech republic is the key factor when deciding about investing in CEZ.

I almost absolutely ignore CEZ presence in Bulgaria, Romania, and Turkey. CEZ has no plans to expand its international presence at the moment and its current positions are in the phase of stabilization, not seeking further financial injections. Therefore, it should not be very important for future of CEZ cash flow or dividend policy.

CEZ generates yearly revenues around 200 billion CZK, EBITDA is circa 60,6 billion CZK and Net Income 18,3 billion CZK.

Source: CEZ Investor Presentation

Analysts expect that business of CEZ will slightly slow down, however the numbers should still remain solid.

Source: Bloomberg

Debt of CEZ stays at reasonable levels comparing to industry standard and to other European competitors.

Source: CEZ Investor Presentation

Cash Flow of CEZ is strong enough to cover all capex in following years.

Source: CEZ Investor Presentation

Dividend Policy

CEZ has approved dividend policy to distribute between 60 to 80 percent of adjusted net income. Last year, the payout

This article was written by

Simon Kostrava profile picture
Avid reader and investor. Long term dividend investing and some opportunity trades. 15+ years of experience on markets (forex, equities, interest rates).My books:Forex: How to Quickly Lose a LotForex Case Studies: Market Turbulence in the Past Decade in the Words of TradersThe Betting Industry

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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