When a UK share delivers a 133% gain in just one year, that grabs my attention.
This FTSE 250 stock is comfortably the top performer in UK’s mid-cap index over 12 months. In fact, no FTSE 100 share comes close to matching its astronomic gains either.
But the good news doesn’t end there. I could also earn a decent amount of passive income thanks to a 4.4% dividend yield.
The company I’m referring to is Bank of Georgia Group (LSE:BGEO). Here’s my take on the factors driving the firm’s success and whether the stunning rally can continue.
An exceptional return
The Georgian economy has proved remarkably resilient in the face of geopolitical challenges posed by the war in Ukraine. After all, the country is no stranger to conflict with its neighbour either, having been invaded by Russia in 2008. Nonetheless, Georgia’s GDP increased by 10% in 2022, according to the IMF.
As a Tbilisi-based company with a UK stock market listing, Bank of Georgia shares have benefited from the country’s economic growth coupled with weakness in sterling. Last year, the net asset value per share of the bank’s investments grew 4% in Georgian Lari from GEL63.03 to GEL65.56. When measured in GBP, that translates into a 33% increase.
In addition, improvements in the company’s profitability have been impressive. Pre-tax profit for 2022 jumped 55% from GEL801.9m to GEL1.24bn. The bank cited higher migration into the country as one of the factor’s behind its success. At least 260,000 military-aged Russian men are estimated to have fled to Georgia since the war started.
The outlook for the shares
So, where’s next for this UK share?
There’s a risk that growth in the Bank of Georgia share price could slow in 2023. The IMF expects GDP expansion will ease to 4% this year as inbound migration and FX inflows subside. Nonetheless, that still looks impressive considering much of the developed world is teetering on the brink of recession.
Passive income is one compelling reason to buy this stock. The company’s trailing dividend yield is 4.4%, but at the current share price, the forward dividend yield for 2023 is over 7%. The combination of potential share price appreciation and big dividend payouts is an attractive one.
In addition, the company benefits from the concentrated nature of the banking system in the Eurasian country. Two banks hold more than 70% of the sector’s assets between them. Bank of Georgia is one, and the other is TBC Bank Group, which is also a UK share with a London Stock Exchange listing. Its share price has grown rapidly over the past 12 months too, by 110%.
Finally, regulatory conditions continue to improve. The World Bank has praised Georgia’s banking sector for being at the “forefront of good corporate governance”.
Should I buy?
There are risks posed by ongoing geopolitical tensions and slowing GDP growth, but overall this UK stock looks like an excellent buy for me.
I’m not expecting returns to be quite as impressive as the past year, but I believe there’s plenty of potential for further share price growth — not to mention a handy dividend yield. If I had some spare cash, I’d buy Bank of Georgia shares today.
