FTSE 250 broadcaster ITV (LSE: ITV) looks to me like one of those rare income plays that also carries a compelling recovery story.
Its dividend profile remains reassuringly high. And with the shares trading well below what I view as their fair value, there could be sizeable capital gains on offer as well.
So, how much could investors make from the stock?
Earnings growth drivers
Any firm’s dividends and share price are driven by growth in its earnings. A key risk to ITV is competition in streaming, which could squeeze its margins over time. Even so, consensus analysts’ forecasts are that its earnings will grow an average of 11.2% a year to end-2028.
I think the company’s growth story is anchored in the parts of the business that sit beyond traditional broadcasting. Digital viewing continues to rise through ITVX, bringing higher‑margin advertising and a more resilient revenue mix.
Meanwhile, the Studios division keeps expanding its global footprint with a pipeline of returning formats and international commissions.
How do recent results look?
ITV’s recent results show clear progress in key areas, in my view.
Digital advertising revenue rose 12% year on year in H1 2025 and 15% over the first nine months. Studios’ external revenue grew 11% in the first nine months.
Total advertising revenue in H1 was up 2% over the previous year and ahead of guidance.
Meanwhile, the group delivered £45m in permanent non‑content cost savings, helping offset inflation and fund investment.
The company now expects stronger cash generation for the full year, and a more resilient earnings base.
Share price gains potential?
A discounted cash flow analysis reflects forecast earnings growth in future cash flows, discounted back to today. Some analysts’ DCF modelling is more conservative than mine.
However, based on my DCF assumptions — including a 7.7% discount rate — ITV looks 31% undervalued at its current 81p price. Therefore, its fair value could secretly be close to £1.17 a share.
This is important, as stock prices can trade to their fair value over the long run.
Dividend income potential?
ITV’s current 6.2% dividend yield compares very favourably to the FTSE 250’s 3.5% average. Analysts forecast it will hold at this level to end-2028, although yields can go down or up over time.
So, investors considering a £5,000 holding in ITV could make £4,280 in dividends after 10 years, rising to £26,965 after 30 years.
This is based on the dividends being reinvested back into the stock — known as ‘dividend compounding’.
By then, the total value of the holding (including the original £5,000 investment) would be £31,965. And that would pay a yearly dividend income of £1,982.
My investment view
ITV looks to be one of those unfashionable FTSE 250 names where the market has become fixated on the structural decline in linear advertising. It appears to be missing the progress happening elsewhere in the business.
I see the firm as a steady, cash‑rich operator rather than a rapid growth story. This could allow patient investors to collect income while waiting for sentiment — and price — to catch up with fundamentals.
I do not buy shares under £1, as I do not want the added price‑volatility risk at my late stage in the investment cycle. However, for less risk-averse investors, I think the stock is well worth considering.
