FTSE 250 media giant ITV’s (LSE: ITV) share price has been stuck in a rut for around three years. But the business itself is showing signs of a more resilient recovery beneath the surface.
That matters for income investors, because a healthier earnings base is ultimately what supports a sustainable dividend and share price gains.
So, how much can investors make from this overlooked stock?
Dividend-supportive earnings growth?
Earnings (‘profits’) growth powers any firm’s dividends over time. A risk to ITV’s is the high degree of competition from terrestrial and digital media firms alike, which may squeeze its margins. Even so, analysts’ consensus forecasts are that its earnings will rise by an annual average of 12.4% a year to end-2028.
This outlook continues to be shaped by the contrasting dynamics of its two core divisions. ITV Studios remains the structural growth engine, with external revenue up 11% year on year in H1 2025. Studios’ scale, international diversification and expanding digital monetisation provide a more resilient earnings base than the market often credits.
Meanwhile, the Media & Entertainment division is stabilising as digital platform ITVX continues to grow strongly. H1’s digital advertising jumped 12%, total digital revenue rose 9%, and streaming hours surged 15%.
This digital momentum is helping offset the long‑term decline in linear advertising. Combined with ongoing cost efficiencies and a highly cash‑generative operating model, these drivers underpin ITV’s medium‑term earnings potential despite a still‑challenging advertising backdrop.
How much dividend income potential?
ITV shares currently generate a 6.3% annual dividend yield. This could go down, up or stay the same over time, according to changes in the share price and in annual payouts.
So, investors considering a £10,000 holding in the firm could make £8,745 in dividends after 10 years. This also assumes that the dividends are reinvested into the stock to take advantage of the magic of ‘dividend compounding’.
On the same basis, the dividends would rise to £55,867 after 30 years. By that time, the holding’s total value (including the original £10,000 investment) would be £65,867.
And that would be paying a yearly dividend income of £4,150!
Potential share price gains?
The same strong earnings growth should also drive the share price higher over time, in my view. Where it might go can be identified using a discounted cash flow (DCF) analysis. This estimates a company’s ‘fair value’ by projecting its future cash flows and then ‘discounting’ them back to today.
Some analysts’ DCF modelling is more bearish than mine, depending on the inputs used. However, based on my DCF assumptions — including an 7.9% discount rate — ITV is 34% undervalued at its current 80p price.
Therefore, its fair value could secretly be close to £1.21 a share.
And this gap between current price and fair value matters to long-term investors because asset prices tend to converge to their fair value over time.
My investment view
I already hold several high-yield dividend shares, so I am not looking to add another right now. However, I believe it is a great opportunity for dividend and price gains.
Consequently, for income-focused investors who can tolerate some volatility, ITV’s combination of a strong dividend yield and the potential for a long‑term re‑rating could make it a compelling candidate for further consideration.
