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A P/E ratio of 10 times and a 6% yield! I’d buy this FTSE 100 dividend stock for my ISA

It wasn’t a shock to see ITV’s (LSE: ITV) share price balloon following mid-December’s general election. Its move to 13-month peaks above 150p per share reflected the improved near-term outlook concerning Brexit. And it was hoped this would herald a recovery in advertising budgets.

What is a bit of a surprise to me, though, is investor appetite for ITV has fallen off more recently. Consequently the broadcaster’s shed 10% of its value since the turn of 2020.

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I believe, though, that this spate of recent weakness represents a top buying opportunity. The outlook for UK advertising spend still looks pretty robust. And recent data on the subject illustrates this point perfectly.

Ad budgets to rise again!

The Expenditure Report authored by the Advertising Association and marketing research specialist WARC is a much-watched gauge on the health of the domestic ad market. And, fortunately, the latest release leaves broadcasters like ITV with plenty to get excited about.

The study suggests total advertising spending in Britain will rise 5.2% in 2020, matching the predicted growth rate for last year. Pleasingly for the broadcasters, television ad budgets are expected to rise 1.7% this year.

This suggests conditions are set to improve markedly for ITV and its television rivals.

The fallout of the Brexit referendum almost four years ago has hammered business confidence more recently and with it, overall marketing spend. Indeed, previous Expenditure reports showed a 0.1% improvement in annual TV ad spend in 2018. And the current edition suggests budgets actually dropped 0.5% in 2019.

VOD squad

Last month’s report is particularly encouraging for ITV, given the massive investment it’s made to improve the ‘ITV Hub’ video on demand (or VOD) platform. The Advertising Association and WARC expects ad revenues in this sub-segment of the media arena to rise at a slower pace in 2020 versus previous years. But expectations of a 14.5% year-on-year improvement in VOD ad sales still provides plenty to cheer.

ITV is reaping the fruits of improving advertiser budgets already. In quarter three, total ad sales rose 1%, at the top end of its guidance. And this is thanks in large part to the success of ITV Hub. It hit the magic 30m subscriber target a full two years ahead of schedule. In recent months, it’s launched an addressable advertising platform to boost its sales-creating opportunities too.

Big dividends at low cost

But don’t just think of ITV as a great buy on a strong outlook for ad spending in 2020. Revenues at the ITV Studios division are growing at a handsome pace. And they should keep doing so as the unit’s global footprint expands. On top of this, the launch of the BritBox streaming service in late 2019 adds another layer to its earnings picture for the years ahead.

At current prices, ITV sports a forward P/E ratio of just 10.3 times. It’s a reading I consider to be far too low in light of its exceptional long-term growth opportunities.

Throw a chubby 6% dividend yield for 2020 into the mix, and I reckon this is one stock worthy of serious attention from dip buyers.

A top stock with enormous growth potential

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Royston Wild 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.