9% dividend yield! A dirt-cheap UK share to buy in May

I’m searching for the best cheap UK shares to buy for my investment portfolio in May. Here’s a brilliant bargain with HUGE dividend yields that I’d buy.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

I love this ultra-cheap dividend-paying UK share right now. Here’s why I’d buy it for my portfolio next month.

Risky business

The tense geopolitical situation in Eastern Europe and Central Asia creates danger for UK shares in these parts of the world.

Take Georgia for example. The Eurasian nation has fast-tracked its application to join the European Union following the invasion of Ukraine.

I don’t necessarily think this is reason enough to avoid companies that operate in Georgia, however. Some shares are so cheap that I think they’re worthy of my serious attention.

9.2% dividend yields

I believe Bank of Georgia Group (LSE: BGEO) is one great cheap UK-listed share to buy at current prices.

Today it trades at £12.30, a price that means a forward price-to-earnings (P/E) ratio of just 3.1 times. This is comfortably inside the widely-regarded bargain watermark of 10 times and below.

What’s more, Bank of Georgia also offers brilliant value from an income perspective. Its forward dividend yield sits at 9.2% today, two-and-a-half-times higher than the 3.5% average for UK shares.

A rock-bottom earnings multiple and high dividend yield are often signs of unrealistic dividend expectations. But I don’t think this description applies to Bank of Georgia.

City projections for 2022’s dividends are covered 3.6 times by anticipated earnings. This is well above the accepted security benchmark of two times, and gives a wide margin of error should annual profits disappoint.

A top growth share

Speaking of which, City brokers think Bank of Georgia’s on course for strong and sustained earnings growth over the medium term at least. They think annual profits will rise 10% and 13% in 2022 and 2023 respectively.

This is perhaps no surprise given the robust outlook for Georgia’s economy.

As I say, the geopolitical situation in and around the country creates some danger. So do the huge sanctions being placed on Russia (given Georgia’s close economic links). It’s also worth noting that Georgia is highly dependent on Ukraine and Russia for key imports and a strong tourism industry.

But right now things still look very bright for Georgia in 2022. The World Bank thinks national GDP will rise 5% from last year’s levels. And the IMF is anticpating growth of 5.8%.

One for the future

Cyclical firms like Bank of Georgia aren’t just looking good because of the promising economic picture there. Financial firms like this are also set to benefit from the low level of banking product penetration in this emerging market.

Profits at Bank of Georgia rebounded strongly in 2021 as the economy recovered from the initial shock of Covid-19. These clocked in at GEL727.1m, up 147% year-on-year.

With economic conditions improving rapidly, and the National Bank of Georgia hiking interest rates to curb inflation, it’s perhaps no wonder than City brokers reckon the bank’s profits will continue rising strongly. This is a great cheap UK share I’d buy to hold for years to come.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Warren Buffett at a Berkshire Hathaway AGM
US Stock

Warren Buffett has owned this stock for 60 years. Should I buy it today?

Jon Smith takes a look at one of the earliest stocks that Warren Buffett bought and muses over whether he…

Read more »

Young Black man sat in front of laptop while wearing headphones
Investing Articles

After a 50% decline in Q4, is now the time to buy Vistry shares?

Stephen Wright thinks a falling share price could be his chance to buy shares in a UK housebuilder with a…

Read more »

Burst your bubble thumbtack and balloon background
Investing Articles

Nvidia stock: a modern-day digital tulip bubble?

With Nvidia stock up over 2,200% in 5 years, Andrew Mackie assesses whether it’s in bubble territory, or fairly priced.

Read more »

Growth Shares

3 reasons why the hottest FTSE 100 sector last year could struggle in 2025

Jon Smith explains why the roaring returns from one FTSE 100 sector last year might not continue due to valuations…

Read more »

Investing Articles

The only UK stock I own at the start of 2025

As 2025 begins, Muhammad Cheema looks at his favourite UK stock. He also discusses why it’s the only one he…

Read more »

Dividend Shares

3 UK dividend growth shares to consider in 2025 for rising passive income

Picking the right dividend shares can potentially generate a rock-solid income stream that continually gets larger over time.

Read more »

Investing For Beginners

2 UK stocks that could be impacted if the US introduces trade tariffs

Jon Smith looks at the UK stocks that could come under pressure this year if the US starts to adopt…

Read more »

Businesswoman calculating finances in an office
Investing Articles

Here’s an unusual idea for UK investors seeking a second income

Stephen Wright outlines why he thinks Experian shares could generate a substantial second income despite having a dividend yield of…

Read more »