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A 10% dividend yield I’d buy for my ISA and hold until I retire

Royston Wild
3 generations putting their hands on top of each other

The beauty of share markets is they give us opportunities to invest in businesses that would otherwise be unavailable to us.

I recently explained how PZ Cussons is a dividend stock that should create ripping shareholder returns over the next decade at least. Why? Its terrific exposure to fast-growing emerging economies in Asia and Africa, that’s why.

But it’s not the only big yielder I’d happily buy today because of booming developing economies.

Profits boom!

TBC Bank Group (LSE: TBCG) is another hot income stock that deserves serious attention right now. It is a major player in the Georgian banking sector and is thus well positioned to ride the electric GDP growth rates in the Eurasian nation through this decade and beyond.

According to the IMF, the long-term growth rate in the country stands at an impressive 5.2%. Real capita per income has almost tripled over the past two decades and unemployment now stands at 15-year lows. It’s an environment which TBC Bank is exploiting to the fullest, as full-year financials released earlier this week showed.

Underlying pre-tax profits at TBC Bank leapt 19.8% year-on-year in 2019, it said, to 545.1m Georgian lari. The bank has a commanding role in the country’s banking sector, its market share remaining stable at around 38% last year.

Spreading its wings

Reflecting those rising wealth levels among Georgian citizens, the bank saw client numbers at its TBC Status division — a sub-segment of its retail operations designed for its richer customers — more than double year on-year in the fourth quarter, to 82,500.

Those full-year numbers also reflected the booming uptake of digital banking in Georgia, like everywhere else. TBC Bank’s efforts to capitalise on this trend by improving its online services showed its number of digital transactions jumped by a fifth in the final three months of 2019, to 21.6m.

Clearly TBC is making huge strides in its home territory. But the FTSE 250 firm isn’t content to sit back and just reap the rewards of this fertile market. Just last month, it was given a preliminary banking licence to launch digital-led operations in Uzbekistan.

10% dividend yields!

It’s hardly a shock but given these numbers, City analysts expect earnings at the bank to keep shooting skywards. A 10% bottom-line rise is forecasted for 2020. And a 13% profits bounce is predicted for next year.

Impressive predictions, sure. However, it’s in the dividend arena where TBC really grabs attention. Annual payouts have boomed in recent years and, helped by its strong balance sheet (its CET1 capital ratio stood at a bulky 12% as of December), more hefty hikes are expected.

Consequently, investors can get hold of monster yields of 6% for this year, and 10.1% for 2021. Allied with its forward P/E ratio of just 5.2 times, I reckon TBC Bank is too good to miss at current prices. I’d buy it today in my ISA and hold it for many years to come.

The post A 10% dividend yield I’d buy for my ISA and hold until I retire appeared first on The Motley Fool UK.

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Royston Wild has no position in any of the shares mentioned. The Motley Fool UK owns shares of PZ Cussons. 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.

Motley Fool UK 2020