Bank of Georgia is paying £2.31 per share in dividends: time to buy the income stock? 

Jon Smith explains why a particular income stock has such a generous dividend yield right now, as well as noting the share price gains.

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We’re nearly through the first quarter of the year. I’m still trying to get my finances up to speed for 2024, which means that I’m on the hunt for some good income stocks that could provide me with solid dividends. From the FTSE 250, the Bank of Georgia (LSE:BGEO) stands out for several reasons.

Clear momentum

First, let’s talk through the key details about the bank. As the name suggests, it operates in Georgia, providing retail and corporate banking services. It has been able to grow market share considerably in recent years, with a strong push towards digital banking. This might sound obvious to us here in the UK, but providing such online banking facilities in Eastern Europe is a lot more impressive.

The latest annual report showed that the number of monthly digitally active users grew by 31.5% year on year.

With a more engaged client base, it was able to grow deposits by 30.1% versus the previous year. Thanks (in part) to higher interest rates, this boosted its profit level by 55.7%. So I can see that this is very much a bank that’s outperforming at the moment.

High share price growth

Even though I’m talking about a dividend stock here, I can’t ignore the incredible share price performance over the past year. The stock has almost doubled in this time period.

Naturally, when I consider the surge in profits and active users, this makes sense. Yet with a price-to-earnings ratio of just 5.19, I’d hardly call the stock overvalued.

The benefit here is that on top of any dividends I receive, I could enhance my yield further by future share price gains. For example, the current dividend yield is 4.79%. If I assume that the share price also gains a similar amount over the next year, my overall yield could hit 10%.

Of course, the risk is that the past performance of the stock doesn’t continue. If the share price drops by 5% over the next year, all of the yield from dividends would be wiped out.

Focusing on the income

The dividend per share for the past year equates to £2.31. This was made up of two payments. Looking forward, I’ll have to wait until the late summer before the next interim dividend gets announced. However, I’d expect that based on the current outlook, it should at least be the same as before, if not higher.

The stock currently trades at £47.25. So if I purchased 100 shares, I’d spend £470.25 and expect to receive £23.10 in dividends each year. Over time, I can take this income and buy more, further compounding my gains.

I have to be aware that the dividend figures are based on the past. There’s a risk that some black swan event could happen that could cause the dividend to be cut going forward. Even though this risk is slim, I still need to be aware of it.

Overall, I really like the stock and am thinking about adding it to my portfolio now.

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.

Jon Smith 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.

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