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Bank of Georgia Group (LSE: BGEO) has been one of the unsung heroes of the FTSE 250. Up 269% in three years, it is the joint highest-performing stock in the index over this period (along with Breedon Group).
After following the company's progress for some time, I finally invested earlier this year. The stock rose almost immediately, which was nice to see.
However, bank stocks have seen a big drop recently. It's down 24% since the beginning of May, which puts me in the red.
Should I buy more of these moving FTSE 250 shares or stay away? We'll see.
What is Bank of Georgia?
The company is one of the largest banks in Georgia and Armenia, two emerging nations whose respective economies grew 7.5% and 9.4% in 2023. They are projected to grow 5% and 6.2% in 2024 .
Obviously, a vibrant economy is vital for a national lender, and Georgia's growth has been very strong for years.
Tourism is booming and the capital, Tbilisi, is regularly cited as one of the best cities in the world to work remotely.
Last year, the bank's adjusted profits rose 21.4%, while its loan portfolio has now expanded at a compound annual growth rate of 30.7% since 2018.
The first thing to check
When a dividend stock suddenly drops, I always check to see if it has become “ex-dividend.” This refers to the period after a company has declared a dividend but it has not yet been paid to shareholders.
During this time, if I buy shares, I am not entitled to receive the next dividend payment. In other words, shares trade ex-dividend or “without dividend.”
However, in the case of Bank of Georgia this has not happened. The stock is scheduled to go ex-dividend on July 4 before a payment on July 19.
A controversial bill
Indeed, this sharp sell-off appears to be directly linked to massive street protests over a controversial “foreign agents” bill that passed its final reading in Georgia's parliament on May 14.
It resembles a Russian law used by the Kremlin. This has raised concerns about government repression of its opponents.
While the bank's operations will not be directly affected by the proposed law, it may lead to a decrease in foreign investment in Georgia's economy. Obviously, that wouldn't be ideal for growth.
Worryingly, the EU has said this new law could harm Georgia's bid for membership. He was not granted candidate status until December 2023.
So this is all a bit worrying, although the bill has not yet become law and parliamentary elections will be held later this year. There could be more volatility ahead.
my movement
After the drop, the stock is trading at a very cheap price-to-earnings (P/E) ratio of 4.5. And the prospective dividend yield is 6.8%, rising to an attractive 7.4% in 2025.
The bank is due to present its first quarter 2024 results tomorrow (May 17). I'll be interested to hear management's thoughts on recent events.
Depending on what is said, the action could catapult in one direction or another.
My strategy is to stay put and see how things develop in the next election. You may get a much better price to buy more shares, with a higher dividend yield. In the meantime, I will focus on other stocks.
