Many banking stocks have slumped in value in 2022. This in turn has supercharged the dividend yields on offer, and the likes of Lloyds now offer market-beating payouts.
Conversely, FTSE 250-listed TBC Bank Group (LSE: TBCG) has soared in value this year. And yet it still offers dividend yields far above almost all other London Stock Exchange banks.
Here’s why I’d buy it for my Stocks & Shares ISA with any spare cash I have to invest.
Banking shares are highly vulnerable to broader economic conditions. Bad loans could spike and revenues might disappoint. So the near-term outlook is packed with trouble as a global recession looms.
But I believe these risks are more than reflected in the TBC Bank’s rock-bottom valuation. Today it trades on a forward price-to-earnings (P/E) ratio of just four times.
What’s interesting is that City analysts expect earnings here to keep rising in spite of the murky macroeconomic picture. They are tipped to increase 46% in 2022 and another 13% next year.
A booming market
I’m optimistic that Georgia-focused TBC Bank can continue growing profits during this tough period, too. Not only are high interest rates providing a bottom-line boost as larger rates widen the difference between what it charges to borrowers and the rates it offers to savers.
I’m also confident that TBC Bank can continue growing profits as demand for financial products improves. Banking product penetration in Georgia remains low, while personal income levels are growing strongly.
I also think the firm is a good position to get exposure to the fast-growing Georgian economy. This geographic profile could give it the edge over most other banking stocks.
The IMF thinks the Eurasian country’s GDP will increase 9% in 2022 and 4% in 2023. This is far higher than growth rates of 3% and 2.7% that the body predicts for the world economy.
9.1% dividend yield!
TBC Bank, then, looks a good bet for solid earnings growth. And in my opinion it’s also a top stock for healthy dividend income. For 2022 it carries a mighty 7.7% dividend yield. For next year the reading moves to an even-better 9.1%.
Of course yields are based on broker estimates. And these can be downgraded at any time. However, I believe there’s a terrific chance that TBC Bank will meet (or possibly even exceed) current dividend forecasts.
Predicted payouts are covered at least three times over by expected earnings. Any reading above two times gives a high level of protection for investors.
Investors can also take comfort from the company’s robust balance sheet. This should give it extra firepower to pay big dividends at least in the short-to-medium term.
It boasted a CET1 capital ratio of 15% as of June. This, too, encouraged the bank to launch a share buyback programme in August.
I think TBC Bank is one of the best FTSE 250 value stocks to buy today. I’d load up on it for healthy long-term passive income.
The post 9%+ dividend yield! A FTSE 250 dividend stock I’d buy this November appeared first on The Motley Fool UK.
Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended Lloyds Banking Group. 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 2022