The FTSE 250 has some strong dividend yields, and Bank of Georgia (LSE:BGEO) is one company remunerating shareholders handsomely. Currently, the Tbilisi-based bank offers an attractive and index-beating 6.1% dividend yield.
So, is this stock worth buying? Let’s explore.
Let your winners run
‘Let your winners run’ is a phrase used by investors that underpins the principle of allowing successful investments to continue growing in value without prematurely selling them off.
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It also responds to the psychological biases that investors often demonstrate. We hold onto our losers for too long and we sell our winners too soon.
I say this because I bought shares in Bank of Georgia in March 2022, just after Russia invaded Ukraine. There was apprehension that Georgia could be brought into the war or face an economic downturn with war waging between its two largest trading partners.
In the end, Georgia’s economy has performed very well as the ruling party — Georgian Dream — has sought to avoid confrontation with Russia. The economy has even benefitted from draft-dodging Russians taking residence in Tbilisi — much to the dismay of locals.
However, I didn’t let this winner run. Instead, I sold with a solid 108% growth and some dividends to top it up. If I had held, I’d be up 230%. I’d also have shares in a company trading at 4.04 times earnings with a 6.1% dividend yield.
Nonetheless, we can’t win them all.
Political uncertainty
Georgian Dream, which has been the largest party in the country since 2012, has put the Georgian economy first. And while this has resulted in Georgia being the fastest growing European economy in recent years, it’s also raised concerns about the leadership’s position on Russia.
Opinion polling shows that Georgian Dream’s lead has reduced in recent years. A part of this is the party’s position on the Russian invasion of Ukraine, and its acceptance of thousands of Russian migrants. The streets of Tbilisi are peppered in anti-Russian, anti-Putin graffiti, and support for banished and now-imprisoned former leader Saakashvili’s United National Movement remains strong.
So, what does this mean?
Well, banks tend to reflect the health of an economy. They are cyclical. As such, I’m a little concerned about the impact political upheaval may have on investors’ perception of this stock.
Nonetheless, it’s hard to ignore some very attractive metrics. Bank of Georgia is among the cheapest UK-listed banks at 4.04 times earnings. And earnings are expected to remain strong, rising from a forecasted 905p in 2023 to 987p in 2025.
And there should be very few concerns about the dividend. It was covered 4.05 times by earnings last year. That’s far above the benchmark for safety — two times.
My only concern is these elections and the potential for civil unrest and prolonged political upheaval. Neither of these are good for the economy, or good for banks.
