9% yield! A FTSE 250 dividend growth stock I’m considering to try and beat the market

A lump sum invested in this FTSE 250 dividend hero could provide a market-beating passive income now and later on, argues Royston Wild.

| More on:
Fireworks display in the shape of willow at Newcastle, Co. Down , Northern Ireland at Halloween.

Image source: Getty Images

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.

Conditions have been challenging for UK income investors in recent months. Dividend stocks delivered 8.6% fewer dividends on a headline basis in the third quarter, according to Computershare.

The £25.6bn total was the worst result since the depths of the Covid-19 pandemic. Excluding one-off dividends, total payments fell 3.5% at stable exchange rates from quarter three of 2023.

Dividends fell for a variety of factors, like a stronger pound and a larger proportion of share buybacks. However, a £2.6bn decline in mining dividends took a big bite out of the quarterly total.

Payouts from utilities stocks also dropped, while banking and oil dividends also failed to inspire.

A dividend stock I’d buy

The good news is that UK dividends are tipped to increase over the full year. However, the pace at which rewards are tipped to grow isn’t exactly impressive.

For the full year, headline dividends are tipped to rise just 2%. This is also almost half the 3.8% growth rate Computershare had previously tipped. Meanwhile, underlying dividends are expected to fall 0.3% on an underlying basis. That’s down from growth of 0.1% previously forecast.

I’m not prepared to accept such mediocre dividend growth as an income investor. So here’s a FTSE 250 passive income share I’m considering buying to target better rewards.

Georgia on my mind

Political turbulence is rising in the Eurasian nation of Georgia. And it threatens to get bumpier after the European Union referendum scheduled for this weekend.

This has obvious implications for the country’s economy and, consequently, a wide range of Georgian businesses. But pleasingly, Georgia’s economy is (for the time being, at least) tipped to continue booming.

The International Monetary Fund (IMF), for instance, thinks GDP will increase 6% in 2025. That’s far ahead of the global average of 3.2%.

In this landscape, I think investing in TBC Bank Group (LSE:TBCG) remains an attractive idea that I’m considering. I certainly believe its low forward price-to-earnings (P/E) ratio of 4.4 times could be enough to counter Georgia’s uncertain political landscape.

Predictions of healthy profits growth mean the bank’s dividends are also expected to keep soaring. Earnings rises of 10% and 20% are predicted for 2024 and 2025 respectively.

9% yield

Last year, TBC Bank raised its annual dividend 32% year on year, to 7.22 Georgian lari (GEL) per share. In 2024, City analysts expect it to rise an extra 3%, to 7.45 GEL. And for 2025, the bank’s total dividend is tipped to balloon 21%, to 9 GEL per share.

Of course, dividends are never guaranteed. But I think TBC’s in good shape to meet these forecasts. Predicted payouts are covered three times over by anticipated earnings, providing a wide margin of error if the bottom line disappoints.

TBC also has a strong balance sheet it can use to meet forecasts — its CET1 ratio was a robust 16.8% as of June.

With its gigantic dividend yields, I think the business could help supercharge my passive income. These are 7.4% for 2024 and 9% for next year.

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 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.

More on Investing Articles

US Stock

Here are the best-performing S&P 500 stocks after the US election result

Jon Smith notes some of the largest gainers from the S&P 500 yesterday and explains how the election result has…

Read more »

Growth Shares

2 UK stocks knocking on the door of promotion to the FTSE 100

Jon Smith points out a couple of UK stocks that he feels could be ready for the big league based…

Read more »

Investing Articles

Rolls-Royce shares just fell 7%. Is it time to buy?

This investor in Rolls-Royce shares takes a look at the FTSE 100 engine maker's trading update to see what caused…

Read more »

Young Black woman looking concerned while in front of her laptop
Investing Articles

What’s going on with the Auto Trader share price?

Paul Summers takes a closer look at why the Auto Trader share price has tumbled despite the company posting higher…

Read more »

Investing Articles

Legal & General shares look set to give me a mind-blowing 10.22% yield in 2026!

Harvey Jones is getting a brilliant second income from his Legal & General shares and expects even more to come.…

Read more »

Investing Articles

I’d consider this beaten-down FTSE 100 dividend stock to target a second income of £19,000

Our writer sees an opportunity to earn a substantial second income by investing in this UK insurance giant. Here’s his…

Read more »

Investing Articles

How cheap is the 72p Vodafone share price?

The Vodafone share price looks very cheap having fallen to a 72p price tag. But is it really the bargain…

Read more »

Aerial shot showing an aircraft shadow flying over an idyllic beach
Investing Articles

Up 43% in a year and the IAG share price could keep on rising!

One of the FTSE 100’s highest-flying stocks still looks cheap on an earnings basis. Is this a brilliant buy for…

Read more »