The Motley Fool

£3k to spend on your ISA? I’d buy this 6% dividend yield and hold it for 10 years

Taking the plunge on Britain’s banks is risky business right now. Throw in a dark economic outlook for the UK economy over the medium term, the persistence of low interest rates, and still-booming PPI provisions, and it’s no surprise that many (including myself) are concerned about their profits and dividend potential in 2020 and beyond.

Those wanting to grab a slice of the banking sector shouldn’t be put off completely, however. It’s still possible to make great returns here; investors simply need to look away from home shores and to businesses making a splash abroad. Take Bank of Georgia Group (LSE: BGEO) as a perfect example.

Sign up for FREE issues of The Motley Fool Collective. Do you want straightforward views on what’s happening with the stock market, direct to your inbox? Help yourself with our FREE email newsletter designed to help you protect and grow your portfolio. Click here to get started now — it’s FREE!

Wow @ profit growth

The Eurasian banking mammoth has long been a favourite of mine thanks to the rate at which the economy in that part of the world is growing. And my confidence has been reinforced today by fresh financials, numbers that have sent the FTSE 250 firm’s share price 10% higher from Wednesday’s close.

In that statement Bank of Georgia advised that operating income rose 5.9% in the three months to September, to 285m Georgian lari, a result which powered pre-tax profit (excluding one-off items) 20.9% higher year on year, to 134.3m lari.

I’ve long championed Bank of Georgia’s long-term profits prospects as economic growth in the far-flung territory dwarves those one can expect in developed markets like the UK. But thanks to regulatory changes that have transformed the Georgian banking sector over the past year the country’s financial houses are on much safer ground than ever before, as higher-yielding yet higher-risk loan products are being weeded out of the system.

Growth + income

Many investors continue to turn their noses up at Bank of Georgia and prefer to invest in more familiar names like Lloyds and Barclays, but in my opinion they’re missing a trick here. Modernisation in the banking industry is clicking along at an impressive rate and this particular firm is investing heavily to push this forwards.

Take Bank of Georgia’s steps in the fast-growing world of digital banking, for example. It has doubled the size of its digital workforce over the past year and taken steps like installing dedicated digital spaces in its branches, launching its ‘Business iBank’ online platform, and consistently tweaked its internet bank and mobile app to capture customers. And the steps seem to be paying off, as seen in the 131% explosion in mobile banking transaction in quarter three.

No wonder, then, that City analysts expect earnings at the FTSE 250 business to swell 15% in 2020 alone. And there are two other reasons to celebrate this projection: as well as leaving Bank of Georgia dealing on a rock-bottom forward price-to-earnings ratio of 5.5 times, it leads to predictions of some scintillating dividend growth. Based on its rock-bottom valuation and its huge 6% yield for next year I reckon the banking behemoth is too good to miss.

You Really Could Make A Million

Of course, picking the right shares and the strategy to be successful in the stock market isn't easy. But you can get ahead of the herd by reading the Motley Fool's FREE guide, “10 Steps To Making A Million In The Market”.

The Motley Fool's experts show how a seven-figure-sum stock portfolio is within the reach of many ordinary investors in this straightforward step-by-step guide.

Simply click here for your free copy.

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.