A 10% dividend yield I’d buy for my ISA and hold until I retire

Looking for big yields on a budget? This banking giant could be just what you’ve been hunting for, says Royston Wild.

| 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.

The beauty of share markets is they give us opportunities to invest in businesses that would otherwise be unavailable to us.

I recently explained how PZ Cussons is a dividend stock that should create ripping shareholder returns over the next decade at least. Why? Its terrific exposure to fast-growing emerging economies in Asia and Africa, that’s why.

But it’s not the only big yielder I’d happily buy today because of booming developing economies.

Profits boom!

TBC Bank Group (LSE: TBCG) is another hot income stock that deserves serious attention right now. It is a major player in the Georgian banking sector and is thus well positioned to ride the electric GDP growth rates in the Eurasian nation through this decade and beyond.

According to the IMF, the long-term growth rate in the country stands at an impressive 5.2%. Real capita per income has almost tripled over the past two decades and unemployment now stands at 15-year lows. It’s an environment which TBC Bank is exploiting to the fullest, as full-year financials released earlier this week showed.

Underlying pre-tax profits at TBC Bank leapt 19.8% year-on-year in 2019, it said, to 545.1m Georgian lari. The bank has a commanding role in the country’s banking sector, its market share remaining stable at around 38% last year.

Spreading its wings

Reflecting those rising wealth levels among Georgian citizens, the bank saw client numbers at its TBC Status division — a sub-segment of its retail operations designed for its richer customers — more than double year on-year in the fourth quarter, to 82,500.

Those full-year numbers also reflected the booming uptake of digital banking in Georgia, like everywhere else. TBC Bank’s efforts to capitalise on this trend by improving its online services showed its number of digital transactions jumped by a fifth in the final three months of 2019, to 21.6m.

Clearly TBC is making huge strides in its home territory. But the FTSE 250 firm isn’t content to sit back and just reap the rewards of this fertile market. Just last month, it was given a preliminary banking licence to launch digital-led operations in Uzbekistan.

10% dividend yields!

It’s hardly a shock but given these numbers, City analysts expect earnings at the bank to keep shooting skywards. A 10% bottom-line rise is forecasted for 2020. And a 13% profits bounce is predicted for next year.

Impressive predictions, sure. However, it’s in the dividend arena where TBC really grabs attention. Annual payouts have boomed in recent years and, helped by its strong balance sheet (its CET1 capital ratio stood at a bulky 12% as of December), more hefty hikes are expected.

Consequently, investors can get hold of monster yields of 6% for this year, and 10.1% for 2021. Allied with its forward P/E ratio of just 5.2 times, I reckon TBC Bank is too good to miss at current prices. I’d buy it today in my ISA and hold it for many 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 owns shares of PZ Cussons. 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

Mature Caucasian woman sat at a table with coffee and laptop while making notes on paper
Investing Articles

10% dividend growth! 2 FTSE 100 stocks tipped to supercharge cash payouts

These FTSE 100 stocks have strong records of dividend growth. And they're expected to keep on delivering, as Royston Wild…

Read more »

Investing Articles

Down 17% in a month and yielding 7.39%! Is this FTSE 100 share a screaming buy for me?

When Harvey Jones bought Taylor Wimpey last year he thought this FTSE 100 share was a brilliant long-term buy-and-hold. Has…

Read more »

Investing Articles

Here’s how I’m using a £20k ISA to target £11k+ in income 30 years from now

Is it realistic to put £20k in an ISA now and earn over half that amount every year in passive…

Read more »

Young black colleagues high-fiving each other at work
Investing Articles

If I could only keep 5 UK stocks from my portfolio I’d save these

Harvey Jones is running through his portfolio of top UK stocks to see which ones he couldn't bear to do…

Read more »

Midnight is celebrated along the River Thames in London with a spectacular and colourful firework display.
Investing Articles

I’m aiming for a million buying unexciting shares!

By investing regularly in long-established, proven and even rather dull businesses, this writer plans to aim for a million. Here's…

Read more »

Investing Articles

3 things to consider before you start investing

Our writer draws on his stock market experience to consider a few vital lessons he would use to start investing…

Read more »

Investing Articles

Will this lesser-known £28bn growth stock be joining the FTSE 100 soon?

As the powers that be plan a reorganisation of Footsie listing rules, this massive under-the-radar growth stock could find its…

Read more »

Investing Articles

Fools wouldn’t touch these 5 FTSE 350 flops with a bargepole – how come I own 3 of them?

Harvey Jones took a chance on three struggling FTSE 350 stocks in the hope that they'd stage a dramatic recovery.…

Read more »