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.
