That’s why I’m using mine to do something specific: craft a portfolio built exclusively around dividend growth stocks. These businesses may not have the highest yields today. But by continuously hiking payouts, the income generated can evolve into something spectacular.

Over time, higher payouts and automatic dividend reinvestment have caused my portfolio to naturally concentrate into a small number of positions. And right now, LondonMetric Property (LSE:LMP), Melrose Industries (LSE:MRO), and Howden Joinery (LSE:HWDN) together make up a combined 32% of my SIPP.

That level of concentration obviously comes with notable risk. But it’s a risk I’m willing to take. Here’s why.

Three businesses, one common thread

Each of these businesses operates in a completely different sector. Yet they share a defining characteristic: durable competitive advantages that support long-term dividend growth, even in periods of macroeconomic turbulence.

LondonMetric is a REIT specialising in logistics and convenience retail property. The structural tailwind of e-commerce driving sustained demand for last-mile distribution assets makes this a genuinely compelling long-term compounder. And contractual rental uplifts underpin a growing dividend that has proven remarkably resilient.

Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice.

Meanwhile, Melrose is an aerospace and engineering group, supplying mission-critical components to aircraft manufacturers including Airbus and Boeing. The multi-decade aerospace upcycles driven by surging global air travel and fleet renewal programmes, as well as the rearmament of Europe, provide a long runway for earnings and, once again, dividend growth.

Lastly, Howden Joinery is the UK’s largest trade kitchen supplier, selling almost exclusively to small builders and tradespeople rather than directly to consumers. That B2B model insulates it from the worst of retail sentiment swings, and its capital-light franchise-style branch network generates consistently strong free cash flow.

That’s why all three have been able to raise shareholder payouts for at least five years in a row, with LondonMetric showing off with its decade-long hiking streak.

What could go wrong?

Of course, even my three favourite holdings come with weak spots worth considering carefully.

Like most REITs, LondonMetric is sensitive to movements in interest rates. If borrowing costs remain elevated for longer than expected, refinancing pressures could weigh on both its own financials and those of its tenants, making lease renewals more challenging.  

Melrose’s multi-year transition into an aerospace pureplay still has plenty of execution risk for management to overcome. But even if this process is completed flawlessly, the firm remains exposed to the wider cyclicality of the commercial aviation sector.

As for Howden, with the bulk of its revenue stemming from the sale of its fitted kitchens, it too is indirectly impacted by higher interest rates, which softens activity within the home renovation market.

But here’s what gives me some contrarian confidence.

All three businesses have continued to grow their dividends through recent periods of significant external stress. That kind of consistency is hard to fake. And it’s exactly why I haven’t trimmed a single position despite the growing concentration.

So, for investors looking for dividend growth stocks to anchor a long-term retirement portfolio, I think all three are worth mulling over.

Should you invest £5,000 in Howden Joinery Group Plc right now?

When investing expert Mark Rogers and his team have a stock tip, it can pay to listen. After all, the flagship Twelfth Magpie Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.

And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Howden Joinery Group Plc made the list?

Zaven Boyrazian owns shares in Howden Joinery, LondonMetric Property, and Melrose Industries.

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The idea is simple: divide a company’s forward price-to-earnings multiple by its forecast earnings growth rate (ideally the medium-term average). A reading below one suggests you’re getting more growth than you’re paying for — a signal that a stock might be cheap relative to its prospects.

The US market feels particularly hot, which has thinned my interest a little. But these are stocks with a low PEG that I’m watching and considering (in some cases buying more of).

Melrose Industries — PEG 0.9

If you missed the Rolls-Royce recovery story, Melrose Industries (LSE:MRO) may deserve your attention today. This FTSE 100 aerospace supplier has quietly delivered an impressive turnaround, taking its operating margin from -8% in 2022 to nearly 17% in its most recent full-year results.

The business makes advanced structural components and electrical systems for Boeing, Airbus, GE and Safran. Crucially, it holds sole-source positions across much of its portfolio — meaning it’s often the only qualified supplier for specific parts on specific aircraft. Those contracts typically run for 25 to 30 years, making the revenue stream unusually durable.

Analysts forecast double-digit annual EPS growth going forward, with a consensus price target of 693p — more than 30% above where the shares sit today. Melrose is available at around 13 times and has a PEG ratio of 0.9.

The main risk is the balance sheet. Net debt stands at £1.74bn and free cash flow is only just turning positive.

US names with sub-1 PEGs

Several US-listed stocks on my watchlist screen well on the same measure, though each carries its own complexity.

• STMicroelectronics, a European semiconductor giant — sits deep in a cyclical earnings trough with a PEG of 0.91. Analysts expect earnings to more than double over the next two years as silicon carbide chip demand accelerates across electric vehicles and AI data centres.

• Arrow Electronics, a global electronic components distributor, trades at a PEG of 0.88 on 25% forecast EPS growth, as the inventory cycle turns and AI-driven demand picks up across industrial and defence end markets.

• Shoals Technologies, holding an estimated 45%–50% share of the US solar infrastructure market and backed by a $748m order book — is at 0.88 too, with data centre solar demand emerging as a second growth driver alongside its core utility business.

• VEON, an emerging market telecoms operator with digital revenue growing at 63% year-on-year, offers 52% forecast EPS growth and a PEG of just 0.22.

• Synaptics, a fabless chip designer pivoting towards AI edge computing and IoT connectivity. PEG at 0.97, with five consecutive quarters of double-digit revenue growth behind it.

• Daktronics, transforming into a high-margin MicroLED display manufacturer and riding a wave of global sports venue upgrades. The PEG sits at 0.71 with a $342m backlog.

All the stocks on this list carry risk to varying degrees. Shoals, for example, faces margin pressure due to tariffs. VEON, headquartered in Dubai, faces significant geopolitical risks.

The bottom line

PEG ratios are a starting point, not a conclusion, and every name on this list carries risk. But when markets are running hot (as it is in the US) finding companies where growth looks under-appreciated is worth the effort. All of these are worth a closer look.

The post PEGs under 1: are these the stocks to buy in May? appeared first on The Twelfth Magpie.

Now consider this: if you want to generate a genuinely life-changing passive income from your Stocks and Shares ISA — enough to actually live on, cover your bills, and stop trading your time for money — you probably need somewhere in the region of £1m in there.

At a 5% yield, that delivers £50,000 a year, or just over £4,000 a month. And it’s tax free, because it’s inside the Stocks and Shares ISA wrapper. It’s the equivalent of a £65,000 salary.

Nowhere near

The uncomfortable truth is this: the vast majority of ISA holders are nowhere near where they need to be. Not because the vehicle doesn’t work — it’s one of the most powerful wealth-building tools available to UK investors — but because most people haven’t approached it with the focus and aggression it requires.

I’m 33, and I think I’m well on my way to that seven-figure target. Not through luck or inheritance, but through years of prioritising growth over income, and investing when others are fearful.

Running some maths

Ok, let’s run some maths. An investor could reach £1.13m by investing £500 a month and achieving an annualised growth rate of 10% over the course of 30 years. This would be a slightly above average growth rate, but more than achievable.

And with £1.13m invested in stocks or bonds yielding 5% annually, the portfolio could deliver £56,500 a year. That works out as £4,708 a month.

The stocks for growth

As the data tells us, most investors will still be in the growth phase. So where to invest?

While my US-listed investments are surging for the sky, my UK-listed investments, such as Melrose Industries (LSE:MRO), are struggling. However, this is where the value appears to be right now.

The stock trades at just 11.9 times forward earnings. That’s a fraction of its industry peers such as Rolls-Royce, GE, and even Safran. This is a great sign of relative valuation.

It’s also occupies a really strong position in the sector with its components featuring on 90% of engines globally — both civilian and military — and a sole supplier position for 70% of its product range. This gives it excellent pricing power.

The business is coming towards the end of a transformation programme that has left it solely focused on the aerospace sector. There appears to be meaningful re-rating potential as the market catches up with the fundamental reality of what Melrose has become.

Risks remain however. This includes the supply chain constraints that have slowed deliveries at Airbus and its peers, and reducing the after-sales component of revenue.

Nonetheless, it’s a great company with strong margins. Well worth considering.

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But here’s my honest take: most investors ask the passive income question too early.

Before thinking about how to extract money from a portfolio, the priority should be growing that portfolio as aggressively as possible.

That means hunting for undervalued opportunities — companies trading below their fair worth, with the kind of durable competitive advantages that can compound returns over years and decades.

And I can say I’m absolutely putting my money where my mouth is. A data-backed approach to growth investing has seen my stock portfolio increase in value by 75% since the start of the year.

This isn’t magic and it’s not an overly concentrated portfolio.

Compounding to glory

The wealth-building phase is where the real magic happens, and cutting it short by pivoting to income too soon is one of the most common — and costly — mistakes I see investors make.

The larger the pot you build, the more effortless the income becomes later. A portfolio of £100,000 generating a 5% yield produces £5,000 a year. Double that pot to £200,000 and the same yield delivers £10,000 — without any extra effort or risk-taking.

Running some maths

Here’s one example.

An investor starts with nothing and chooses to invest £500 of their salary every month — using a Stocks and Shares ISA wrapper (this is just a vehicle to shield gains from tax). For this example, the long-term growth rate of the investments (the stocks) is 10% — that’s just a little above the long-term average of indexes.

Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.

Now, after 25 years, the value of the portfolio will be £663,416. That’s a sizeable portfolio.

At this sage, in my head I’d be moving from growth-oriented investments to dividend-focused ones. A 5% yield here would generate £33,170 per year or £2,764 per month.

Of course, nothing is guaranteed. But this is how the theory works.

Where to invest?

My shares in Credo, Sandisk, Micron, Marvell, Alphabet etc have all surged recently and may be near fair value. But some of my UK holdings have underperformed in recent months.

One of these is Melrose Industries (LSE:MRO). This aerospace manufacturer combines a cheap valuation and positive long-term trends in civil aviation and defence.

Melrose, following the pullback, now trades at 11.9 times forward earnings and has a price-to-earnings-to-growth (PEG) ratio of 0.8. Not only is this a discount to the FTSE 100, it’s a huge discount to the wider aerospace sector.

And relative valuation discounts are where I’m most interested.

This is just a handful of peers, but Melrose stands out. What’s more, it offers that largest dividend of the lot at 4.5%.

Supply chain constraints, impacting aircraft production, leading to lower deliveries and aftermarket sales is a concern.

However, I certainly believe investors should consider this one. Especially given its sole source supplier position on 70% of its sales.

The post How much is needed in an ISA to target a £2,764 monthly passive income? appeared first on The Twelfth Magpie.

Right now, the UK State Pension generates £241.30 a week, or £12,547.60 a year. So how big does a SIPP need to be to generate the equivalent?

What do the numbers say?

When it comes to retirement planning, everyone’s situation is a little different. But extensive research has shown that withdrawing no more than 4% of a portfolio’s value a year is the right balance between generating an income and ensuring wealth continues to compound in the background.

So following this 4% rule, a £12,547.60 passive income will require a SIPP portfolio to be worth roughly £313,690. For reference, that’s more than double the average UK private pension pot of £137,800 in 2025.

How to get to £300k+

Let’s say an investor’s starting from scratch today and can only comfortably spare £500 a month from their salary. After that money is deposited into a SIPP, it automatically gets topped up to £625 by the government through 20% tax relief.

This money can then be invested in something as simple as a low-cost index fund. And assuming the UK stock market continues to generate its historical 8% average return, an investor would have built a nest egg worth £332,739.35 in 19 years.

But what if £12.5k passive income isn’t enough? That’s where stock picking can come to the rescue.

Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.

How to earn even more

Picking stocks definitely requires more knowledge and discipline. Yet it also opens the floodgates to potentially game-changing returns. And anyone who’s been investing in Melrose Industries (LSE:MRO) over the last 19 years has experienced this thrill first-hand.

Even when buying in 2007, right before the global financial crisis, Melrose shares have still delivered a staggering 2,079.7% total return to date. That’s the equivalent of earning 17.6% a year, transforming £625 a month into £1,135,758.02 – enough to generate a £45,430.32 passive income!

Is Melrose still worth considering in 2026?

Back in 2007, Melrose was an engineering conglomerate that acquired struggling businesses and focused on turning them around. Today, it’s a very different beast, transformed into an aerospace pureplay enterprise, supplying industry titans such as Boeing, and Airbus, among others.

This transformation has only recently been completed. And as such, the group’s financials are still pretty complicated with murky accounting practices. Nevertheless, when digging through the weeds, the firm emerges as an enormously profitable enterprise with an impressive growth runway.

There are still some valid weak spots. Supply chain constraints created by the current geopolitical landscape are creating some annoying headaches – a problem only made worse by the additional disruptions to the civil aerospace sector. 

With a large chunk of earnings coming from its profitable aftermarket services segment, prolonged disruptions to its core market could result in Melrose falling behind on key targets. Nevertheless, with the shares trading at an undemanding valuation, I think there’s still a compelling long-term growth opportunity here.

That’s why I’ve already added Melrose to my SIPP. And it’s not the only stock on my radar right now.

The post How much do you need in a SIPP to earn £12,547.60 in passive income a year? appeared first on The Twelfth Magpie.

It isn’t. For anyone with a Stocks and Shares ISA and a long enough runway, it’s a realistic destination.

The maths is straightforward. A £1m portfolio yielding 6% annually produces £60,000 in income — £5,000 a month, tax-free inside an ISA. The 6% is achievable; plenty of high-quality UK dividend stocks yield at or above that level right now — however, it does introduce a level of risk that you may not experience closer to 4%.

Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.

The £1m is the harder part — but not as hard as it sounds.

There are currently around 4,000 Stocks and Shares ISA millionaires in the UK. That’s a small number relative to the millions of ISA holders, but it’s growing, and there’s nothing especially unusual about the people who get there. They started early, contributed regularly, and let compounding do the work.

How long does it take? At £1,000 a month, assuming 10% annualised returns (roughly in line with long-run equity averages), a portfolio crosses the £1m mark in around 25 years. Contribute £1,500 a month and that falls to around 20.

These aren’t aggressive assumptions — personally, for instance, my portfolio is almost three times larger today than it was two years ago when we moved house (when I needed to dip into my ISA for the first time).

However, 10% is the kind of returns a broad equity portfolio has historically delivered over long periods. The enemy is starting late, stopping early, or keeping the money in cash.

In short, the path to £5,000 a month in passive income starts now. It’s about accumulation. Build the pot first. Deploy it into income-generating assets second.

Where to invest?

So what should investors actually buy?

A winning portfolio is often a diversified one. My portfolio has been successful in recent years with 20 investments plus bond holdings.

And one stock I continue to have faith in is Melrose Industries (LSE:MRO).

Melrose supplies advanced components to every major aerospace original equipment manufacturer in both civil and defence markets — and crucially, many of those positions are sole source (roughly 70%).

When an engine or airframe is certified with a Melrose part, that part stays in for the product cycle. That means decades of recurring revenue as the installed base flies on.

That’s the same structural advantage that commands a premium multiple at Rolls-Royce. Yet Melrose trades on a forward price-to-earnings of around 13.5 times — less than half what the market awards Rolls. I think that gap is too wide, and as Melrose’s earnings trajectory becomes clearer to the market, I expect it to narrow.

The risk worth acknowledging is tariff exposure. Melrose has significant US manufacturing and supply chain activity, and any escalation in trade policy could pressure margins or complicate customer relationships.

That said, I certainly believe this stock is worth considering.

The post Fancy £5,000 of monthly passive income? It’s possible… appeared first on The Twelfth Magpie.

Parent of tier-one defence and aerospace supplier GKN Aerospace, Melrose is a critical supplier to the global defence ecosystem. This provides it with strong structural demand, long‑term revenue visibility, robust pricing power, and clear geopolitical support.

But the market is still pricing it as the old, lower‑margin business it was before it refocused on aerospace, with a major defence slant.

So, how much can investors make from that price-to-valuation gap now?

How’s its valuation compared to peers?

A good starting point to assess Melrose’s valuation is a comparison with its direct competitors.

On the key price-to-earnings measure, its ratio of 17 is the second lowest of these firms, which average 30.3. The companies are Safran at 16.2, BAE Systems at 31.9, GE Aerospace at 34.5, and RTX at 38.6. So, it is deeply undervalued on this basis.

The same is true of its price-to-sales ratio of 1.7 — bottom of its peer group, which averages 3.9. And it also looks a bargain on its 2.2 price-to-book ratio compared to its competitors’ average of 8.3.

What’s it really worth?

Discounted cash flow (DCF) analysis identifies where a stock should trade by projecting future cash flows for the underlying business and ‘discounting’ them back to today.

Analysts’ DCF modelling varies — some more bullish than mine, others more cautious — depending on the variables used. However, based on my DCF assumptions — including an 8.5% discount rate — Melrose shares are 54% undervalued at their current £5.27 price. So the fair value is around £11.46, according to my model.

Asset prices can trade towards their fair value in the long run. If those DCF assumptions hold, this suggests a potentially superb buying opportunity to consider today.

What’ll drive earnings higher from here?

Its 2025 annual results saw adjusted operating profit soar 20% year on year to £647m. This highlighted that the shift towards higher‑margin aerospace programmes is already boosting profitability. With defence‑linked engine components continuing to scale, that margin expansion looks set to continue.

Revenue in its key Engines division jumped 15% to £1.63bn, underlining strong long‑term demand across key platforms, including the F‑35 and next‑generation fighter engine families. It gives the business a multi‑year pathway of volume growth that should support rising earnings ahead.

And free cash flow saw a £199m improvement to a £125m inflow. The turnaround demonstrated how restructuring costs are falling away and operational efficiencies are bedding in. Management expects this to accelerate as the group targets stronger cash conversion through 2028/29.

A risk here is any major failure in one of its key products that could be expensive to remedy. Another is any supply-chain delays that could restrain production momentum.

Even so, these growth factors show a business with rising profitability, improving cash generation, and a clearer strategic runway than the market is currently pricing in.

My investment view

I already hold shares in BAE Systems and Rolls-Royce, so owning another in the sector would unsettle the risk-reward balance of my portfolio.

However, for investors without this problem, I believe Melrose looks a great business to consider, at a bargain price.

The post Down 23% to around £5! Here’s why this overlooked FTSE 100 defence gem ‘should’ be trading over £11 appeared first on The Twelfth Magpie.

The thing is, everyone knows Rolls-Royce. And that’s probably down to the car brand they don’t own.

But not everyone knows Melrose Industries (LSE:MRO). It’s a different company, same script.

Pure-play aerospace

Melrose has spent recent years shedding automotive and other non-core divisions to emerge as a focused aerospace supplier, making advanced components and systems for all major original equipment manufacturers. These include Boeing, Airbus, GE, and Safran. That’s a great list of customers.

The business spans civil and defence markets. Crucially, it holds sole source positions across much of its business — around 70%.

What’s more, these are long-term, often exclusive supply agreements for specific parts on specific aircraft. Once embedded on a programme, Melrose is typically there for the life of that aircraft — often 25-30 years.

The revenue is recurring — the switching costs are enormous, and the barriers to entry are high. It’s exactly the kind of quality business with an embedded structural competitive advantage that made Rolls-Royce so rewarding for patient investors.

The turnaround in numbers

In 2022, Melrose reported an operating loss of £246m on a margin of -8.33%. Full-year 2025 results showed operating profit of £600m and an operating margin of 16.72%. Normalised EPS hit 33.1p last year — up 70% — pointing to the company trading at 16 times earnings.

The dividend’s growing at 20% a year. And the 16 analysts covering the stock have a consensus price target of 693p — more than 30% above today’s price of around 515p.

On an earnings basis, there’s cause to argue it’s still undervalued. Rolls trades at more than double Melrose’s forward price-to-earnings (P/E) of just 13.2 times. The price-to-eanrings-to-growth (PEG) ratio of 0.9 is vastly discounted versus many other aerospace/industrial stocks.

The bottom line

Of course, there are risks and concerns. Net debt’s risen to £1.74bn and free cashflow’s only just turning positive. The balance sheet leaves limited room for error if civil aviation demand softens or defence programme timing slips. This is a genuine risk and worth watching closely.

However, the shares are down 22% from their 52-week high, caught in the broader turbulence of the year. For long-term investors, the combination of sole source positions, a transformed margin profile, and the prospect of strong earnings growth from this valuation makes it well worth considering.

And honestly, I wouldn’t be surprised to see it push towards all-time highs later this year, especially if the conflict in the Gulf comes to an end and interest rates continue to push downward.

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These numbers are testament to a business that has been genuinely transformed under CEO Tufan Erginbilgiç. The long-term story — growing demand with civil aviation, the defence spending boom, and an expanding power systems division — remains highly attractive.

The issue however, is the price. At 30 times forward earnings and a price-to-earnings-to-growth (PEG) ratio over two, it’s by no means cheap. The risk is simple. If execution stumbles at all, that multiple compresses fast.

For new investors, the risk/reward may look a little stretched. The company still offers a huge amount, including in nuclear technologies, but the meaningful undervaluation isn’t there.

Something much cheaper

Melrose Industries (LSE:MRO) provides exposure to the same aerospace upcycle, but at a much lower valuation. Down 28% from its 52-week high, the stock trades at just 12.4 times forward earnings with a PEG ratio of 0.9, suggesting the market’s paying very little for what is forecast to be 16% forward earnings growth.

One key operational highlight here is that Melrose holds a sole-source position for 70% of its produced components. This means there’s no alternative supplier. That creates genuine pricing power and sticky, recurring revenue as the global fleet expands and ages.

The risk worth watching is the balance sheet, with net debt sitting a little ahead of where you’d want to see it. Currency fluctuations are also something to keep an eye on.

Hidden in plain sight

I think many Britons don’t realise that they can invest in Airbus. It’s a household brand and perhaps the most straightforward quality case of the three.

As one half of a global commercial aviation duopoly, Airbus has pricing power on a generational scale. Its order backlog stretches years into the future and revenue is forecasted to grow from €73bn in 2025 to over €100bn by 2028.

The earnings forecast — largely curated before the outbreak of war — is on a clear upward trajectory from €6.60 to €10.77 over the same period. On 2027 numbers, the stock trades on just 18 times earnings.

That’s a huge discount to Rolls. It also offers a 2.1% dividend yield and a has a rock-solid balance sheet with €12.2bn in net cash.

The main risk is operational. Airbus has struggled to ramp production rates to meet demand, and the supply chain has been problematic. Tariff exposure on transatlantic trade is also worth monitoring.

However, the valuation cushion is substantial, as is the moat.

All three companies are worth considering for long-term investors. But Rolls-Royce, for all its quality, asks investors to pay a premium price for a premium business. Melrose and Airbus, by contrast, offer a lot of the same at a considerably more attractive entry point.

The post I like Rolls-Royce shares but not the price tag. Here are 2 cheaper alternatives appeared first on The Twelfth Magpie.

For long-term investors with cash at the ready, market weakness might actually be an opportunity rather than a reason for caution. Here are two UK-listed names I think deserve a close look.

UK aerospace

Melrose (LSE:MRO) is absolutely worth paying closer attention to. Many investors may not even realise that it’s a FTSE 100 company.

Spun out as a pure-play aerospace components business, the company holds a sole-source position for 70% of the products it produces. That means customers simply can’t go elsewhere. It’s genuine pricing power.

The business is currently undergoing a transformation and cash flow has just turned positive — something management called an inflection point. EPS grew nearly 70% in 2025 and is forecast to grow a further 14% in 2026 and 23% in 2027 — yet the shares trade on just 12.4 times forward earnings with a price-to-earnings-to-growth ratio of 0.9.

It’s not just me however. The stock’s down 28% from its 52-week high, and the analyst consensus price target sits more than 40% above the current price.

A risk to flag is the balance sheet. Net debt stands at £1.74bn. That’s manageable while aerospace demand holds up, but it does mean Melrose has less room for error than some investors might like.

A Georgian bank

TBC Bank‘s (LSE:TBCG) even less well-known but arguably more interesting from a valuation standpoint. It’s a Georgian bank — a dominant retail lender in one of Europe’s fastest-growing economies — with expanding operations in Uzbekistan.

The headline numbers are super-strong. The forward price-to-earnings is just 4.9 times.There’s a PEG ratio of 0.4 and a dividend yield of 7.37%, backed by a cover of 2.76 times and growing at a compound annual rate of over 17%. Revenue’s grown at nearly 25% annually over recent years, and return on equity sits at 23.8%.

What’s more, TBC’s largely insulated from the risks that started impacting Western banks in February — concerns about AI-driven white-collar job losses, mortgage stress, falling consumer confidence. Georgia and Uzbekistan are growing economies driven by demographics and rising consumer spending rather than knowledge-economy employment.

As with every investment, there are risks. Geopolitical exposure in the Caucasus, proximity to a war zone, Georgian lari currency fluctuations, and relatively thin analyst coverage with only four brokers following the stock.

Personally, I think these are all baked into the price.

My take

Neither of these is a guaranteed winner — no stock ever is. However, they’re two quality companies currently trading at a discount to fair value. I think they’re both worth considering.

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