These 2 FTSE 250 shares look outstanding value to me

These two FTSE 250 firms have seen their share prices plunge from their 2023 highs. Hence, I own both for their fat dividend yields and recovery potential.

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From July 2022 to August 2023, my wife and I built a new family portfolio. We ended up with 27 new stocks: 15 FTSE 100 and five FTSE 250 shares, plus seven S&P 500 mega-cap holdings.

While constructing this pot, we bought US stocks for growth potential and FTSE shares for cash dividends. Already, this stand-alone portfolio has generated thousands of pounds in passive income.

Two FTSE 250 bargains

Of course, some of our shareholdings have lost ground since purchase. Indeed, a few of our holdings have plunged in value from their 2023 highs.

For example, take the following mid-cap stocks, both of which look incredibly undervalued to me today. If I had investable cash to spare, I’d snap up more shares in both firms without delay.

Bargain buy #1: ITV

With reality-TV show I’m a Celebrity…Get Me Out of Here! returning to ITV (LSE: ITV) programming, millions of Brits will be eagerly watching these antics for weeks.

While I may shun certain ITV shows, I’m a firm fan of the group’s incredibly cheap shares. In fact, I consider them one of the biggest bargains in the entire FTSE 250 index.

At the current share price of 60.38p, ITV shares hover just 2.3% above their 52-week low of 59.04p, hit a year ago. Yet at their 2023 peak, they briefly hit 96.62p on 9 February.

Over one year, ITV shares have lost 18% in value — and have crashed by almost three-fifths over five years, losing 59.8%. This leaves the broadcaster and producer valued below £2.5bn.

After such heavy falls, this stock trades on 8.9 times earnings, delivering an earnings yield of 11.2%. This leaves its hefty dividend yield of 8.3% a year covered 1.4 times by earnings.

Alas, ITV faces several headwinds in 2024. Advertising revenue growth has reversed, driven down by a poor economic outlook and squeezed household budgets. However, ITV Studios is growing strongly, as are digital revenues. Nevertheless, I like the stock.

Cheap stock #2: Close Brothers Group

And now for something completely different, leaping from film and TV to finance. My second ‘fallen angel’ with strong recovery potential is Close Brothers Group (LSE: CBG).

Though hardly a household name like ITV, Close has established itself as a mid-sized UK player in merchant banking, business and consumer lending, wealth management, and securities trading.

At their 52-week high, Close shares hit 1,139p on 6 January. They currently trade at 766.5p, diving almost a third (-32.7%) in under 11 months. Over one year, this stock is down 27.4%, while it has nearly halved over five years, plunging 48.9%. This has cut Close’s market value to under £1.2bn.

For me, these declines have pushed this business deep into value territory. As a result, this FTSE 250 stock offers a chunky dividend yield of 8.8% a year — one of the highest in London. However, this payout is not fully covered by trailing earnings, which could be a problem if this were to continue.

Lastly, though I have high hopes for this stock, conditions for financial firms look tough for 2024. And if lending growth goes negative, Close’s revenues, earnings, and cash flow would suffer. That said, I’m on board for the long term!

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Cliff D’Arcy has an economic interest in both shares mentioned above. The Motley Fool UK has recommended ITV. 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.

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