As an old-school value/dividend/income investor, I’m constantly searching for new high-yielding shares to add to my family portfolio. Often, I concentrate my searches on the blue-chip FTSE 100 index. Then again, I’m also not averse to dipping into the mid-cap FTSE 250 index for value.
For example, here’s one FTSE 250 dividend stock that I’d gladly buy today (when I have some spare cash) for its impressive cash yield — and also for its potential for future capital gains.
A high-yielder
For the record, I already have ITV (LSE: ITV) shares in my family portfolio. My my wife bought some at an all-in price of 68.7p a share in late June 2022. But I’d happily buy more at current prices. Here’s why.
At the current share price of 74.6p, terrestrial broadcaster and content producer ITV is valued at £3bn. In late 2019, it was valued at twice as much, making it a proud member of the FTSE 100.
Here’s how this stock has performed over seven different periods:
| One day | -1.3% |
| Five days | -0.5% |
| One month | -8.8% |
| Year to date | -0.7% |
| Six months | -1.4% |
| One year | +0.3% |
| Five years | -55.6% |
Over one year, this share has barely budged. However, over half a decade, the stock has lost more than half of its value, diving almost 56%. But this suggests to me that it may be back in bargain-bin territory.
2023 could be tough for ITV
Of course, as the UK’s largest terrestrial commercial TV operator, ITV’s revenues are driven by ad spending. And at the moment, big companies are cutting back on their adspend, partly due to the cost-of-living crisis. That’s why I fully expect lower earnings for ITV this year than in 2022.
However, over the longer term, I’m expecting a much brighter future for this firm. For example, it’s worth noting that the shares hit a 52-week high of 96.62p on 9 February on rumours of a bid approach for the entire business. But nothing came of this ‘word on the street’.
At its 52-week low on 29 September 2022, the stock briefly dropped below 54p, before bouncing back. But even after rebounding strongly (it has leapt 38.2% from this low), it still looks cheap to me.
Currently, this share trades on a rating of just 7.1 times historic earnings. This translates into an earnings yield of 14.2% — almost double that of the FTSE 100.
Furthermore, ITV’s dividend yield of 6.7% a year is three percentage points above the Footsie’s yearly cash yield of 3.7%. Even better, this payout is covered 2.1 times by trailing earnings — a comfortable cushion against any downturn.
In summary, my wife and I will hang tightly on to our ITV shares for their cash-generating ability. What’s more, if the price continues to weaken, we may well buy more when we get a cash windfall in July!
