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Like vibrant yellow sale stickers in outlets, shares with excessive dividend yields are likely to catch the attention. ITV (LSE:ITV) is one from the FTSE 250 that at all times stands out to me.
Maybe it’s nostalgia, as I’m sufficiently old to recollect classics like Heartbeat and A Contact of Frost. As a child, I’d usually keep over at my grandparents on a Saturday night time, when the likes of Gladiators and Stars in Their Eyes could be on the telly on channel three (ie, ITV).
All that has modified, in fact. If I confirmed my daughter (who’s about the identical age now as I used to be again then) the ITV schedule these days, she would most likely not recognise a lot.
In distinction, if I requested her if she has heard of Netflix‘s Stranger Issues or Wednesday, she would have a look at me like I used to be a dummy. Proper now, she’s obsessive about the animated film KPop Demon Hunters. Was that made by or out there on ITV? No, it was Netflix, once more.
In fact, one may query whether or not this can be a related — and even honest — comparability. However I feel it’s. If ITV has no cultural relevance for youthful generations (who now spend way more time consuming content material from YouTube, Netflix, and social media), the place does that depart ITV long run?
Tales of two companies
Now at 82p, the share worth is down practically 70% in a decade.
To my thoughts, ITV is a type of circumstances the place traders like one a part of the enterprise however not a lot the opposite. This prevents sufficient folks from investing, ensuing within the disappointing long-term efficiency above.
It jogs my memory of WH Smith, which till just lately had each excessive avenue and journey retail companies. The previous (which it has now offered) was in long-term decline whereas the latter is seen as having long-term progress potential (because of rising world journey).
Pets at Dwelling is one other instance, with a rising vets enterprise however a struggling retail operation.
In ITV’s case, there’s the legacy TV broadcasting aspect and the Studios division. The previous is in decline. For proof, contemplate a latest TouchPoints survey, which discovered that grownup Brits now spend extra time on telephones than watching TV. And on telephones, they’re not watching movies/collection an excessive amount of.
Nevertheless, ITV’s Studios can profit from this fractured media panorama. As a result of in addition to producing content material for ITV, it additionally makes high quality content material for different streamers, together with Netflix, Amazon, and Disney.
This provides Studios secular long-term progress potential.
Potential sale
Due to this fact, I do assume ITV can stick with it paying common dividends. It makes cash from linear TV adverts, digital streaming adverts by means of ITVX, and the Studios content material aspect.
So, with the inventory buying and selling at simply 9.8 instances ahead earnings and carrying a 6.1% dividend yield, I can see the temptation right here.
There have additionally been rumours just lately {that a} sale of its broadcasting enterprise may occur. A concrete bid may ship the inventory surging.
Passive revenue
After I have a look at the dividend forecast although, I’m much less tempted. Analysts forecast no future progress within the payout, and even perhaps a slight decline.
Weighing issues up, I’m going to maintain on the lookout for different high-yield passive revenue alternatives. There are just a few about proper now.
