Legal & General Group

Legal & General Group (LSE: LGEN) has a great opportunity to benefit from Britain’s rapidly ageing population.

It must paddle hard given the ultra-competitive market in which it operates. But its expertise across fields such as pensions and wealth management could help it to thrive as retirement planning becomes more common.

Legal & General is a true industry giant. It generated pre-tax profit of £1.2bn in the first half of 2022. And, pleasingly for dividend investors, it generates huge amounts of cash with which to pay market-beating dividends.

For 2022, the company carries an 8.6% dividend yield. It also trades on a forward price-to-earnings (P/E) ratio of 6.5 times, making it a great all-round value stock to buy.

Ibstock

Brickmaker Ibstock (LSE: IBST) is a dividend share I already own. And following recent trading details I’m tempted to buy more.

On Tuesday, it said that “robust demand patterns” for its products persisted during the third quarter. As a consequence, trading for the period came in above its expectations.

Higher interest rates pose a threat to the business. Demand for its brick and concrete products could be hit if the housing market suffers a shock. This in turn could damage the passive income I receive.

But from a long-term view, I think Ibstock’s market outlook remains rock solid. And this is why I’d buy more of its shares today. Britain’s colossal housing shortage means home construction rates should rise sharply in the years ahead.

On top of this, brick sales will likely be supported by a strong repair, maintenance and improvement (RMI) market. Renovation activity should remain strong due to the high average age of the UK’s housing stock.

Today, Ibstock carries a decent 6% dividend yield. It also trades on a forward P/E ratio of 8.2 times.

Bank of Georgia Group

Demand for financial products is soaring in certain Eurasian markets. This makes Bank of Georgia Group (LSE: BGEO) another FTSE 250 stock I’d buy for long-term income.

Far-flung Georgia hasn’t been an attractive destination for banking stock investors historically. However, steady reform of the country’s financial industry make it a much more attractive place to invest today.

Meanwhile, the likes of Bank of Georgia continue to enjoy surging revenues as the domestic economy rapidly grows. Pre-tax profit here jumped 39% year on year during the six months to June.

Economic growth in Georgia could suffer in the event of a long Ukraine-Russia war. But this is a risk I think is more than reflected in Bank of Georgia’s rock-bottom valuation.

The firm trades on a forward P/E ratio of 3.5 times right now. Meanwhile, its 2022 dividend yield sits at an enormous 7.6%.

And so far, I’ve been correct. The bank is doing well and the Georgian economy is continuing to grow rapidly — 9.2% in 2022, and 5% in 2023, according to the Bank of Georgia’s H1 report, which was published today.

But I’m still bullish on Bank of Georgia, and I think it can go higher. So let’s take a closer look at this stock and its recent performance.

H1 earnings above expectations

Bank of Georgia shares shot up 5% on Tuesday after it announced better-than-expected first-half results. Pre-tax profits of GEL574m were 53% higher than in the first half of 2021.

Profits were boosted by forex gains while there was steady growth in net loans of 4.3%. The burgeoning tourism sector enabled Bank of Georgia to leverage its position as the largest payments business in the country. Increasing interest income also spurred the growth forward.

Meanwhile, credit trends remained positive, with the cost of risk in Q2 at 0.6%, below the first quarter level of 0.8%

Analysts at Peel Hunt said “the outperformance in terms of FX gains will lead to increases in our full year pre-tax profit estimates of more than 10%“.

Outlook

In its earnings report, Bank of Georgia highlighted Galt & Taggart’s revised 2022 real Georgian GDP growth forecast of 9.2%. That’s considerably above previous estimates.

While Russia and Ukraine are two of Georgia’s biggest trading partners, the Georgian economy is continuing largely unhampered. Tourism revenue is actually above pre-pandemic levels, and Tbilisi is filled with Russian emigres. Georgia is also becoming increasingly popular with tourists from the Middle East.

Why is this important? Well, the bank’s performance is pretty reflective of the state of the Georgian economy. I consider Georgia to be one of the most stable high-growth markets in the world and that’s one reason why I’m bullish on this bank.

Valuation

The bank trades with a price-to-earnings (P/E) ratio of just five. That’s incredibly cheap. In fact, in May, the bank was trading with a P/E of just three — the share price has since risen considerably. But I think the cheap valuation largely reflects concerns about investing in a lesser-known economy.

It’s also worth noting that the bank traded in excess of the current share price before the pandemic. While 2020 was a bad year for Bank of Georgia, the fundamentals have continued to grow year over year, with that one exception.

I accept that a global economic downturn could slow Georgian growth next year and this wouldn’t be good for Bank of Georgia, but I’m still pretty bullish, especially in the long run. At the current price, I’d still buy more. It also has an attractive dividend yield, of around 5.5%.

The metric can be manipulated to look at future value, called the forward P/E. And this is calculated using the profit guidance for the year ahead.

However, the metric cannot be used when a company isn’t making a profit. For example, growth stocks are often unprofitable for a considerable period of time. In fact, many don’t succeed in becoming profitable.

When valuing non-profit making companies, it would make more sense to use the price-to-sales ratio. So here are two of the cheapest UK-listed stocks, according to the P/E ratio, with the exception of distressed shares like Polymetal.

Bank of Georgia

Bank of Georgia (LSE:BGEO) has a P/E ratio of just 4.9 — that’s less than half of the FTSE 100 average. The Tbilisi-based bank is actually trading at a 52-week high, having fallen to a 52-week low in March following Russia’s invasion of Ukraine. Both countries are major trading partners of Georgia.

However, it has gone from strength to strength in recent months. Bank of Georgia is due to give its results on Tuesday, just days after peers TBC Group. TBC highlighted expanding operating costs but reiterated medium- and long-term guidance.

It will hope to improve on its stellar performance during the last financial year. Bank of Georgia delivered £192m in pre-tax profit in 2021 — the figure is some distance above pre-pandemic levels.

In the long run, I’m bullish on this bank as I see the country as one of the most stable high-growth markets in the world. However, I do appreciate there could be some short-term challenges in the coming months as the global economy battles inflation and a forecast economic downturn.

I bought Bank of Georgia in March and would buy more at the current price.

Royal Mail Group

Royal Mail Group (LSE:RMG) is down 48% over the year and has a P/E of 4.4. The company is certainly going through a challenging period, but I think there is considerable potential here. Losses have been extended in recent months as employees walk out on strike.

The postal service said in July that revenues had fallen 11.5% year-on-year during the first quarter of its trading year. It highlighted weakening retail trends, lower Covid-19 test kit volumes, and a return to a structural decline in letters.

However, this is very much a business in transition. One of the issues highlighted was the inability to adjust to lower volumes. But that shouldn’t be a big issue going forward. Royal Mail is on an efficiency drive and is shifting towards the mechanisation of sorting parcels and mail.

Before the pandemic, most parcels were processed by hand. Clearly that’s a costly process. But now that number is closer to 50% and this should help the business become leaner.

And there are growth areas in the buisness. Royal Mail said its Netherlands-based parcel service GLS expects full-year operating profits ranging €370m-€410m.

I already own Royal Mail stock, but would buy more at this knockdown price.

The good news, however, is that many high-dividend stocks have seen their yields shoot further through the roof. Here are two top income stocks I’d buy to boost my income.

Foresight Solar Fund

I think Foresight Solar Fund’s (LSE: FSFL) an ideal stock for investors seeking a reliable second income.

The company’s dividend yield sits at 5.7% for 2022. This is more than double the FTSE 250 average of 2.8%.

The essential nature of Foresight Solar’s operations — it owns a portfolio of solar farms in Britain, Australia and Spain — means that profits here remain stable even during tough times. This gives it the financial strength and the confidence to pay big dividends year after year.

Electricity is an essential commodity, after all. But I also like Foresight Solar because green energy is becoming a white-hot growth sector as the fight against climate change intensifies. The International Energy Agency thinks solar power generation alone will rise by an average of 24% every year between now and 2030.

Creating electricity using the sun isn’t as reliable as using fossil fuels. Cloudy periods can smack power generation levels and this can have a big knock-on effect on earnings. Still, it’s my opinion that the long-term benefits of owning this stock outweigh the temporary trouble adverse weather may cause to profits.

And besides, I think this danger is more than priced into Foresight Solar’s rock-bottom valuation. Today the renewable energy stock trades on a forward price-to-earnings (P/E) ratio of around 6.5 times.

Bank of Georgia Group

Bank of Georgia (LSE: BGEO) might not have the investor recognition of popular dividend stocks like Lloyds or Barclays. But I believe the brighter economic outlook in the Eurasian country makes it a better buy for passive income.

There’s also the fact the bank’s dividend yields soar past those of the FTSE 100 banks. For 2022, its yield sits at a mighty 8.4%.

The main threat facing the Georgian economy — and by extension this emerging market bank — is a long war between Russia and Ukraine. Indeed, the Asian Development Bank thinks this will cause the country’s GDP growth to fall to 3.5% in 2022 from 10.6% last year.

But the long-term outlook here remains robust. Personal wealth levels are tipped to grow strongly as the economy picks up momentum (GDP growth is expected to rise to 5% next year). So demand for financial services should also keep improving. It’s worth remembering that Bank of Georgia’s profits soared 57% between 2017 and 2021.

Today it trades on a P/E ratio of just 3.5 times. I think that this, combined with its high dividend yield, makes it a brilliant value stock to buy.

But when share prices go down, dividend yields go up. And the dividend yield I get will always reflect the price I paid for the stock, regardless of whether the share price goes up or down.

So here are stocks with sizeable dividend yields that I’d buy more of for my portfolio right now.

Bank of Georgia

The Bank of Georgia (LSE:BGEO) operates in the high-growth market of Europe-focused Georgia and currently has a 6% dividend yield on the back of a stellar year in 2021. The Bank of Georgia, and its peer TBC Group, are much less popular than western peers, and tend to trade with price-to-earnings ratios that are considerably lower than developed market banks.

The lender has an impressive history of paying sizeable dividends relative to the share price, with the exception of during the pandemic. But the dividend is largely sustainable and it reflects the high growth environment that it operates in.

The Georgian economy grew an impressive 10.5% between January and June. And this isn’t just a good few months. Georgia is a democratic country with market economy which works closely with institutions such as the EBRD to enhance long-term growth objectives.

The economy may expand more slowly towards the end of the year amid a war between two of its largest trading partners. That’s what the forecasts say. But this is yet to be seen. Also, Tbilisi is currently filled with Russian émigrés. That won’t be bad for business.

Legal & General

The Legal & General (LSE:LGEN) share price has been on the rise in recent weeks, but its still considerably below its 52-week high. The stock reached 309p in late 2021, but now trades around 268p. The share price has actually be pretty volatile, and was largely impacted by the Russian invasion of Ukraine before recovering.

The current dividend yield is tasty 6.7%. Last year, the coverage ratio — a metric that indicates the ability of a firm to pay the dividend — was a fairly healthy 1.85. Although a coverage ratio above two would be healthier, L&G generates plenty of cash so last year’s ratio shouldn’t be problematic.

For 2022, the British multinational financial services and asset management company declared a full-year dividend of 18.45p, up 5% on the year.

I’m generally pretty bullish on the outlook for Legal & General. It’s a household name and I think that’s positive for preventing capital outflows and attracting customers in the long run.

But it’s also worth noting that Legal & General’s exposure to the housing market might be a source of pain in the coming months amid a forecast economic downturn.

Here are two I think could be too cheap to miss.

Taylor Wimpey

The Taylor Wimpey (LSE: TW) share price has fallen by more than a quarter in 2022. It’s a descent that reflects fears that rising interest rates will crush the housing market.

It’s a danger that stock investors need to take seriously. But I feel that the impact of rising rates has been overstated. After all, mortgage rates remain well below historical norms. It’s why average property prices continue to rise (in fact they jumped at their fastest pace since 2004 in June, according to Halifax).

Extreme market competition means that homebuyers can still get ultra-affordable mortgage products from lenders. Furthermore, first-time buyers can still claim financial support from the government to get on the ladder.

And on Monday the Bank of England scrapped a key mortgage affordability test that could boost demand still further.

Full disclosure: I actually own shares in Taylor Wimpey. I’m an investor who buys stocks based on what returns I can expect over the long term (say a decade or more).

And I believe this FTSE 100 share will generate blockbuster profits over this period. The UK’s housing stock remains woefully short and should remain so given weak housebuilding activity. And population growth is tipped to stay strong, driving demand higher and with it property values.

As a fan of value investing I think Taylor Wimpey is particularly attractive right now. In fact I’m thinking of adding more to my portfolio given current prices. The business trades on a forward price-to-earnings (P/E) ratio of 6.7 times. It carries a big 7.2% dividend yield as well.

Bank of Georgia Group

Banks in emerging markets like Bank of Georgia (LSE: BGEO) are far less popular with investors than household names like Lloyds and Barclays. But strong economic growth in these regions could potentially deliver better long-term returns to investors.

Take Georgia, for instance. The economy there grew an impressive 10.5% between January and June. And this is no temporary blip: the Eurasian country saw GDP soar during the decade leading up to the pandemic.

I particularly like Bank of Georgia as an emerging market banking stock. This is because industry regulations in the country have been significantly tightened in recent years. It’s why ratings agency Fitch has described Georgia’s banking sector as “stable and well-capitalised.”

Cyclical shares like banks could suffer in the short term as the global economy cools. But in my opinion, this risk to earnings is well baked into Bank of Georgia’s low rock-bottom valuation.

Today the stock trades on a forward P/E ratio of 3.2 times. And I feel this, combined with the bank’s enormous 9.1% dividend yield, makes it a top cheap stock for me to buy.

The metric is calculated by dividing the company’s share price by its earnings per share.

However, it’s worth noting that a very low P/E could be a sign that something is wrong. 

So, here are some of the cheapest UK-listed stocks according to the metric.

Bank of Georgia

The Bank of Georgia (LSE:BGEO) has a P/E ratio of just 3.7. That’s very low, particularly for a financial services company. In fact, it’s so low that I might think that something is amiss here.

The share price plummeted after Russia’s invasion of Ukraine. Both countries are major trading partners of Georgia, despite Tbilisi’s uneasy relationship with Moscow.

The stock has recovered somewhat, but the falling share price belies the strength of the Georgian economy and the bank’s operations.

The bank delivered £192m in pre-tax profit last year, which is exceptional considering the impact of Covid-19.

The Georgian economy is continuing to grow and this is reflected by the performance of its peers in H1.

The economy may expand more slowly than expected this year, and that would hurt revenue. But this is yet to be seen. Tbilisi is currently filled with Russian émigrés. Georgians don’t like it, but it won’t be bad for business.

TBC Group

We’re in Georgia again. TBC Group (LSE:TBCG) is its number one bank. The share price has largely mirrored that of the Bank of Georgia.

It has a P/E ratio of around 2.4 having made $299m in pre-tax profits last year. Its current market cap is just £669m. That means it must be the the cheapest non-distressed asset on the UK stock market.

In May, TBC said that profits were up year on year as the Georgian economy boomed. First-quarter net profits jumped 46% from the same quarter last year to 224m lari (£61m). Uzbek operations were also expanding in line with expectations, it said.

Risks are very similar to those faced by the Bank of Georgia. But on the whole, I see Georgia as an attractive and stable growth market for long-term returns.

Barclays

Barclays (LSE:BARC) has a P/E of four. Yes, there are definitely stocks on the index with lower ratios, but they’re much riskier. For example, Polymetal has a P/E just above one. But that’s a really distressed stock.

This FTSE 100 bank is a giant of the financial services industry. Total income for the first quarter rose 10% to £6.5bn, despite big litigation and conduct charges.

There’s plenty of uncertainty around the UK economy, but there are upsides for banks as interest rates rise. In fact, this week, Credit Suisse said it expected upgrades to lenders’ guidance for net interest margins and net interest income.

The forecast downturn in the UK economy is unlikely to be good for business. But in the long run, things will improve for Britain. Either way, I’d buy more Barclays shares with the P/E at its current levels.

I’ve actually bought all of the stocks on this list, and would buy more at the current prices.

Bank of Georgia Group

Price: £15 per share
Dividend yield: 8.7%

Bank of Georgia (LSE: BGEO) could be in for a rough time in the near term as the global economy splutters. And this particular bank could be viewed as more risky than other banking shares too.

This is on account of how important a strong Russian economy is to Georgia. Right now, the slapping of sanctions on Moscow represents a significant indirect risk to cyclical shares like Bank of Georgia.

However, it’s my opinion that the dangers facing the bank are more than reflected in its low valuation. Today, it trades on a price-to-earnings (P/E) ratio of just 3.3 times. This is massively lower than the multiples of 7 times and 9 times UK-focused Lloyds and NatWest trade on respectively, for example.

I’d certainly rather buy Bank of Georgia than those FTSE 100 banks. Britain’s economy is facing increased headwinds and the The Organisation for Economic Co-operation and Development (OECD), for example, is predicting zero growth for 2023.

I also think the Georgian banking market provides better long-term opportunities than the UK. Financial product penetration in the Eurasian nation is super low. And it looks set to grow strongly from this low base as personal wealth levels sharply rise.

The Renewables Infrastructure Group

Price: 135.8p per share
Dividend yield: 5.2%

Increasing my exposure to green energy has been an aim of mine for some time. So following recent market volatility, I decided to invest in renewable energy stock The Renewables Infrastructure Group (LSE: TRIG).

I chose this energy producer because it has added strength through various levels of diversification. Its portfolio comprises solar, wind and battery storage assets. It therefore offers me protection if one form of renewable energy becomes less profitable. I also like the fact its assets are spread out across Europe. This means profits aren’t vulnerable to adverse conditions in one or two regions.

The problem with investing in renewable energy stocks is the expensive nature of their operations. Keeping turbines and photovoltaic panels in tip-top condition can cost a lot of money, and especially as extreme weather events become more regular.

Still, I believe the potential rewards of owning TRIG shares as demand for green energy rockets offsets the risk that high costs pose to returns. The International Agency thinks wind energy generation will need to rise 18% a year between now and 2030 under current net zero targets.

In fact, I’m thinking of adding more TRIG shares to my portfolio given the cheapness of its shares today. As well as offering a huge dividend yield the business trades on a forward price-to-earnings growth (PEG) ratio of just 0.5. Any reading below 1 suggests a stock is undervalued.

The volatility was triggered by higher-than-expected US inflation data. This was followed by more negative economic forecasts concerning the UK and Germany, as well as new Covid-19 restrictions in China.

But a correction also creates opportunities. In fact, in my opinion, despite the fiscal tightening around the world over the past week, the economic situation hasn’t changed, particularly in the UK. It’s still pretty negative.

However, I’m investing for the long run. So, here are three UK-listed shares I’m looking at adding to my portfolio.

International Airlines Group

IAG (LSE:IAG) is down a staggering 44% over the past 12 months. And, like others, I thought the worst was behind airlines in 2021.

Looking at my portfolio, my decision to buy IAG a few months ago looks like an investment mistake on paper.

But, in the long run, I think the airline group — which includes British Airways — will prove a sound buy.

For one, IAG’s market capitalisation is £5.5bn, but the enterprise value stands at £16.15bn. The market cap takes into account the high amount debt held by the company and the perception of the market. But you’d expect the enterprise value and market cap to be closer.

Demand for travel is also particularly high right now. The issue is around staffing and travel disruption. Come the end of July, we’ll see how well IAG performed in Q2, but my expectation is that the impact of well-publicised travel disruption has been overdone.

Baillie Gifford Japan Trust

The Baillie Gifford Japan Trust (LSE:BGFD) is a publicly traded investment trust, focusing exclusively on Japan. It is run by the same asset management firm as the Scottish Mortgage Investment Trust.

This is a growth-focused fund, and that explains why it’s fallen particularly heavily over the past year.

But there are several reasons why I’m optimistic here.

Firstly, inflation isn’t hitting Japan in the same way it’s hitting the rest of the world. Inflation stood at 1.9% in May. That’s below the 2% target.

Secondly, the Bank of Japan hasn’t increased rates. It’s keeping borrowing costs down to help Japan’s economy recover after the pandemic. This should be good for Baillie Gifford’s growth-focused portfolio.

Finally, Japan might be better positioned to deal with the scarcity we’re seeing globally. But don’t just take my word for it, there’s plenty of material to support this.

Bank of Georgia

I invested in the Bank of Georgia (LSE:BGEO) when Russia invaded Ukraine, despite the bank’s share price collapsing.

But it’s been a good investment so far, and I still think it’s got further to go, despite being down 7.5% this week.

The bank has been going from strength to strength, as has the Georgian economy. The economy grew by a further 14.4% in Q1 despite the war in Ukraine.

Profits doubled in 2021 and 2022 looks like it should be another strong year. Peer TBC Bank has recently announced a 46% YOY increase Q1 profits.

On the back of a stellar 2021, Georgia’s second largest bank has a P/E ratio of just four.

For me, Georgia is a great growth market. Stable, democratic, and I believe Tbilisi is one of the coolest places in Europe!

Valuation

The P/E ratio is a metric for valuing a firm based on its stock price and the earnings per share over the trialing 12 months or last reporting year. Based on the current share price and financials for the year ending December 31 2021, the Bank of Georgia has a P/E ratio of just 3.18. That’s very low, particularly for a financial services company. In fact, it’s so low that it feels to me like something must be wrong.

The P/E figure reflects the bank’s earnings per share of 364p for 2021 and the current share price of 1,160p. More broadly, we can see that the Bank of Georgia has a current valuation of £544m while delivering £192m in pre-tax profit last year.

Why did the share price fall?

The share price fell following Russia’s invasion of Ukraine and the subsequent introduction of Western sanctions against Moscow. Despite a troubled relationship with its northern neighbour Russia, along with Ukraine, they’re two of Georgia’s largest trading partners. As a result, Georgian economic growth forecasts were slashed to 2.5%.

But for me, the economic fallout from the war has been too heavily factored into the share price. I see Georgia as a high-growth market in the long run. It’s one of the most democratic and forward-looking nations in the former Soviet space and has one of the best ease of business rankings in the world. In fact, for a long time, it was ranked number one.

Finances

Its performance was good in 2021, buoyed by strong economic data. In March, Georgia’s Office for National Statistics said the economy had grown 14.6% year-on-year. The Bank of Georgia in turn posted that pre-tax profit of £192m, more than any year in the last five. Despite poor performance during the pandemic, it still delivered profits and I believe it has a strong future ahead of it as Georgia’s number two bank and an international operator.

An alternative

Georgia’s largest financial organisation, TBC Bank, is also in the FTSE 250. In fact, it represents a similar opportunity to the Bank of Georgia. It has a trailing-12-month P/E ratio of 3.2 and experienced a bumper year in 2021. Pre-tax profit for the 12 months to December 31 rose to £226m, massively up from 2020. 

TBC Bank has also expanded its operations outside Georgia. The company recently noted that the Georgian banking business will remain its core strategy, but highlighted the upside of its Uzbek business.

Risks

There could be some short-term pain for these two banks as we’re yet to see how the Georgian economy will fare due to the war. How it will impact trade and tourism is uncertain, although it hasn’t put off Russians. Direct flights from London to Tbilisi haven’t restarted — they haven’t operated since spring 2020. Equally, the war may deter big spending visitors from the Middle East.

Despite these risks, I’m a shareholder in both banks and looking to buy more.