This amazing FTSE 250 has a 8.8% dividend yield and trades at just 4x forward earnings!

Our Foolish writer believes this FTSE 250 stock is worth keeping a very close eye on. However, he’s not keen to invest just yet.

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Banks tend to trade at a discount to the wider economy, and this FTSE 250 bank is no different. However, TBC Group (LSE:TBCG) is actually even cheaper than the average UK banking stock.

This Tbilisi-based banking group is currently trading at just four times forward earnings and offers investors a huge 8.8% dividend yield.

Is it too good to be true? Well, there is a catch.

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Created with Highcharts 11.4.3TBC Bank PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.co.uk

The catch

I’m very fortunate to have close friends in Tbilisi, and maybe this helped me navigate the current turmoil. Last year I sold my shares in TBC Group and its peer, Bank of Georgia.

Why did I do that?

Well, Georgian politics has become increasingly polarised in recent years, and 2024 is an election year. It was never going to go smoothly.

And although the parliamentary election is in October, things got off to an early start last month when the ruling Georgian Dream Party introduced the ‘foreign agents’ law.

The law requires people and organisations receiving 20% or more of their revenues from overseas to register as foreign agents.

Obviously, this didn’t go down well, and it’s led to widespread protests. Moreover, the price of UK-listed Georgian stocks has slumped. That’s because investors like stability.

Is there a good outcome?

Personally, I’m not sure what the best outcome is for Georgia this year.

The ruling Georgian Dream Party has been accused of being too soft on Russia. It essentially follows a pro-growth agenda and founder Bidzina Ivanishvili made his $6bn fortune in Russia.

However, the last time the main opposition party — the United National Movement — was in power, Georgia lost a devastating war against Russia and many of the country’s foremost business leaders were forced to hand over assets to the state.

And this is why I’m taking a backseat. While it seems likely the Georgian Dream will stay in power, I’m just not sure everything will go smoothly.

The business is great

In May, the business reported that pre-tax profit had risen by 15.8% in the first quarter. Net interest income jumped 21%, driven by higher interest rates and a “dynamic” loan book.

It also helps that the bank is operating in one of the fastest-growing economies worldwide — remember banks are cyclical.

We continue to feel the benefits of strong economic growth within our two major operating countries, with our outlook for Georgian economic growth this year raised to 6.4%, while we expect very solid and consistent 5.6% growth in Uzbekistan“, management stated.

Moreover, the metrics are great. The stock is trading at four times forward earnings, and this figure falls to 3.3 times in 2025, and 2.8 times in 2026.

The dividend is also projected to grow by around 12% annually over the next three years. This makes it a highly attractive stock for both income and growth-focused investors.

The issue, as eluded to, is political. For now I’m just keeping a close eye on things.

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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.

James Fox 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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