Down 50% in 5 years, this is the FTSE 250 stock I want to buy now

Think the FTSE 100 is the only place to find top value dividend stocks? I think this FTSE 250 stock could be one of the best on the market.

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I’m looking for a FTSE 250 stock to add to my 2024 Stocks and Shares ISA. And right now, I can’t see anything I like better than ITV (LSE: ITV).

Before I explain what I think is so good about it, let’s first take a look at what’s gone wrong.

I’ll start with the share price. And after a tough few years, 2024’s tentative early rise has already started to go off the boil.

What went wrong?

Falling advertising spending has been part of ITV’s woes. Soaring inflation, rising interest rates, mortgage pain… it’s all meant a lot less spare cash to spend for a lot of people. And that means there’s less gain to be made by advertising to them.

But while ad revenues might be under pressure, other ITV divisions have been doing well. ITV Studios saw a 4% rise in 2023 revenue, hitting a record. And the company also recorded a 19% rise in digital revenue.

With FY results, released in March, ITV said it was on track to hit its 2026 targets. And that brings me to one of the share’s two main attractions for me.

Forecasts

It sounds like forecasts are on the money so far. I know 2026 is still a good way out. But if it all goes according to plan, we could be looking at a price-to-earnings (P/E) ratio by then of only around 7.5. That looks too cheap.

That, of course, is if the ITV share price doesn’t change by then. And if earnings grow enough for that kind of valuation, it must do, surely?

The dividend yield could be up to 8% by then too. And that’s the second big thing.

We already have 7% on the cards for 2024. And I think ITV might be the best FTSE 250 dividend stock to buy this year.

Danger

There are risks, though. ITV’s targets are ambitious, and they depend on two things. One is achieving that planned growth, and the other is achieving the board’s cost-cutting targets at the same time.

If either of those goes even slightly amiss, I think it could send investors running for the exit again.

I mean, looking at how even the little bit of optimism in 2024 is fading, it seems clear that sentiment is still some way from coming back behind ITV.

Anything that damages the firm’s ability to hit its dividend forecasts could hammer the share price again.

Dividend income

But I just think about what these dividends could do for my long-term passive income prospects.

Even £200 a month put into ITV at a 7% annual return could turn into more than £34,000 in 10 years. That’s with dividends used to buy more shares, and no rises in either the annual cash or the share price for the next decade.

So will I buy ITV shares? Well, I’d only buy them as part of a diversified ISA. And right now, I don’t have my next investment cash ready.

But as soon as I do, ITV might just be my first FTSE 250 buy of the year.

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.

Alan Oscroft has no position in any of the shares mentioned. 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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