1 deep value stock under 99p that’s grabbing my full attention!

Value stocks abound in the UK market today. Here, our writer considers an out-of-favour FTSE 250 share with a temptingly high 7.2% dividend yield.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Bearded man writing on notepad in front of computer

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

sdf

Like most people, I do love a bargain, especially one that could make me money. Fortunately, I’m in luck because the London Stock Exchange is currently jam-packed with value stocks in all shapes and sizes.

Unfortunately, however, my funds are low after adding quite a lot of shares to my portfolio in recent months. But the good news is my buy-list backlog has largely been cleared now, freeing up space for new ideas.

Here is one FTSE 250 stock that has caught my eye with its low valuation multiple and 7.2% dividend yield.

Should you invest £1,000 in ITV right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if ITV made the list?

See the 6 stocks

Reasons to turn off

ITV (LSE: ITV) shares have plunged 58% in five years, leaving the share price at just 69p today. For context, they were at 260p in August 2015.

What on earth has gone wrong here?

Created with Highcharts 11.4.3ITV PriceZoom1M3M6MYTD1Y5Y10YALL22 Aug 201822 Aug 2023Zoom ▾Jan '19Jul '19Jan '20Jul '20Jan '21Jul '21Jan '22Jul '22Jan '23Jul '232019201920202020202120212022202220232023www.fool.co.uk

Well, the first thing to say is that the broadcaster is dealing with the decline of terrestrial television. According to the media regulator Ofcom, just 54% of young people now watch any live television. Yet even older audiences, who were generally loyal to traditional TV, are now consuming more streamed content.

Worryingly, the number of terrestrial TV programmes pulling in more than 4m viewers has halved since 2014. This mass audience decline limits the broadcaster’s ability to charge big bucks for advertisements. That’s even more the case today, with a weak ad market.

The broadcaster does have its streaming offering, ITVX, but it faces enormous competition. Beyond Netflix, Amazon Prime, and Disney+, there is also TikTok, YouTube, and various gaming platforms. All are competing for eyeballs and subscriptions.

High-quality content

So, why would I even consider going near the stock?

Well, I like that ITVX is growing rapidly and now has 12.5m monthly active users. Management plans to increase that to 20m with £750m of digital revenue by 2026.

Importantly, ITVX already has a solid foundation, with tens of thousands of hours of popular content already available. The challenge will be getting people to upgrade to paid subscriptions over time.

Additionally, the proliferation of streaming services should continue to benefit its Studios division. This is the part of the business that makes productions for third-parties in the UK and internationally. Hit shows include Hell’s Kitchen, Love Island, and Come Dine With Me.

So, while the group’s first-half external revenue fell 2% to £1.6bn, Studios revenue rose 8% to £1.0bn.

I might tune in

ITV shares are dirt-cheap with a P/E ratio of just eight, which reflects the challenges the business faces.

However, the reward for taking on this risk is a 7.2% dividend yield, with the payout covered 1.7 times by anticipated FY23 earnings. Then there’s the potential of a turnaround in the share price.

Of course, neither is guaranteed, but I can’t help thinking the stock might be close to rock bottom in terms of investor sentiment. That is, all negativity seems priced in, and then some.

Finally, I’ll mention the ongoing strikes in Hollywood involving writers and actors. These have put a freeze on the creation of new content in the US. Perhaps ITV will step in and licence its pre-made content to US broadcasters if they need to fill their schedules this autumn.

When I have more cash, I may invest in ITV shares.


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.

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Ben McPoland has no position in any of the shares mentioned. The Motley Fool UK has recommended Amazon.com and 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.

More on Investing Articles

Array of piggy banks in saturated colours on high colour contrast background
Growth Shares

Here’s what analysts expect for the Tesco share price in the coming year

Jon Smith runs through the outlook for the Tesco share price using both his own opinion (and research) and that…

Read more »

Night Takeoff Of The American Space Shuttle
Investing Articles

This ex-penny stock jumped 16% today! Should I buy it for my ISA?

Our writer revisits a small-cap UK stock that he passed up on last year for his Stocks and Shares ISA.…

Read more »

Two female adult friends walking through the city streets at Christmas. They are talking and smiling as they do some Christmas shopping.
Investing Articles

How much do you need in an ISA to target a £2,500 monthly income?

Harvey Jones thinks FTSE 100 shares are a brilliant way to generate a long-term second income stream, and names a…

Read more »

Businessman hand stacking money coins with virtual percentage icons
Investing Articles

These ‘boring’ FTSE 100 dividend stocks just hit 52-week highs!

Who needs to be part of the AI-frenzy when certain dividend stocks are making an absolute packet for more conservative…

Read more »

Businesswoman calculating finances in an office
Investing Articles

This FTSE 100 stock is forecast to beat Rolls-Royce in the coming year — and it’s only £1!

Rolls-Royce has been the FTSE 100 star of 2025, but analysts think this £1 homebuilder could deliver over three times…

Read more »

Mature black woman at home texting on her cell phone while sitting on the couch
Growth Shares

Down 86% over five years, this FTSE stock could be nearing the bottom

Jon Smith points out a FTSE share that has been beaten up in recent years but could start to show…

Read more »

The flag of the United States of America flying in front of the Capitol building
Investing Articles

This is nuts. When’s the stock-market crash?

Share prices keep hitting record highs in 2025. The bad news for investors is that asset prices look inflated, which…

Read more »

Santa Clara offices of NVIDIA
Investing Articles

AI wars: is the Nvidia share price under threat from rival AMD?

Up 56% in a year, the Nvidia share price looks unstoppable. But a new AI chip from rival AMD threatens…

Read more »