Yield of 6.4%! Is ITV a dividend stock to consider buying during the Euro?

Scotland face Germany tomorrow (June 14) in the opening match of the European Championships. The game is live ITV (LSE: ITV), which prompted me to take another look. FTSE250 dividend stocks.

After all, it’s up 24% year to date, so something must be wrong. Is it worth adding to my portfolio? Let’s listen and take a look.

A successful series factory

ITV is a vertically integrated producer, broadcaster and streamer. Out of these three, I’m bullish, bearish, and undecided, in that order. Let me explain.

Firstly, I love the content ITV produces through their Studios division. Decades of know-how go into these shows, making them a hit factory. And like many viewers, I thought that the recent drama series Mr. Bates versus the Post Office was unbelievable.

Then there is love island, which is not my cup of tea. In fact, I prefer to go into the kitchen and make myself a cup of tea when it is on. But it’s clear that this dating show continues to be a huge international success.

Downton Abbey was also extremely popular abroad. It has even boosted tourism in the UK, with fans eager to experience the majestic lifestyle depicted in the series.

Last year, ITV Studios generated record revenues and profits, with 32% of total revenue coming from streaming platforms like Netflix And Amazon Main video. These content-hungry streamers will likely devour some ITV Studios shows for many years to come.

This unit is on track to deliver an average revenue growth of 5% per year between 2021 and 2026. It’s the jewel in ITV’s crown, I’d say.

And the other two?

As for traditional broadcasting, it’s hard to be anything other than pessimistic about it. Linear television has long been in decline, with ad spending shifting to where the audiences are (streaming and social media).

This is why ITV places so much importance on its streaming platform, ITVX. Total audience hours there increased 16% in the first quarter to 449 million hours, with digital ad revenue up 14%.

By 2026, ITV predicts digital revenues will rise to at least £750 million. But I worry whether this will ultimately be enough to offset the current decline in traditional advertising.

The story continues

ITVX also faces a mountain of competition, from YouTube to Disney+ and beyond. I worry that younger generations won’t replace older viewers in sufficient numbers over time.

That said, the digital strategy is progressing very well so far. And ITV announced in March that it had sold its 50% stake in BritBox International to the BBC for £255 million.

I was never convinced by this adventure, especially by its name. So I think it was a smart move. The company plans to return £235m of cash to shareholders via a share buyback.

Should I invest?

The stock appears good value, trading on a forward price-to-earnings (P/E) ratio of 8.7. But it has long looked cheap, having fallen about 55% over the past decade.

Of course, that doesn’t count dividends, but those haven’t reliably grown. In 2019, the payment was 8p per share. Today it’s 5p per share, giving a yield of 6.4%.

Overall, I’m still not convinced enough to invest in ITV. I believe there are other stocks that can provide better returns in the coming years.

The post yield 6.4%! Is ITV a dividend stock to consider buying during the Euro? appeared first on The Motley Fool UK.

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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 stocks mentioned. The Motley Fool UK recommended Amazon and ITV. The opinions expressed about companies mentioned in this article are those of the author and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. At The Motley Fool, we believe that considering a broad range of information makes us better investors.

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