Here’s 1 unloved income stock I’m buying, with a 7% payout!

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One income stock I’m buying imminently is ITV (LSE: ITV). Here’s why.

ITV share price fall in recent years

ITV is a household name. The broadcaster and production studio is the home to many of UK TV’s famous names and shows. Yet it has experienced difficulties in recent years. I’m not worried too much about the past, but more so the future direction of the business, which I think is positive, albeit not without its challenges.

As I write, ITV shares are trading for 72p, which is exactly the same amount they were trading for at this time last year. To provide a bit of context, five years ago, they were trading for nearly 60% higher, at 168p.

From a bullish perspective, ITV has many facets to its business, all of which could boost future earnings and growth. This is useful when buying an income stock as diversification can protect earnings from falling overall if one area struggles.

ITV has done well with its streaming operations, ITVX. It has seen the number of streaming hours increase steadily in recent times. Next, advertising sales is big business. Despite a recent drop off in advertising revenue for ITV due to a slowdown in the market as a whole, it has still performed resiliently, in my opinion. Finally, its production studio has produced some great hit shows with excellent viewership, notably Love Island and I’m a Celebrity.

Moving on to the fundamentals, ITV has a good balance sheet with lots of cash on the books. This is useful for any income stock as it means the dividend yield, currently at a healthy 7%, is well covered. I am aware that dividends are never guaranteed and can be cancelled at the discretion of the business.

Finally, in my opinion, ITV shares are a bargain at current levels. They trade on a price-to-earnings ratio of just under six.

To the bear case then. Terrestrial television is a declining market. This is due to the changing habits of content consumers and the rise of digital streaming. This could impact future earnings and investor returns. ITV has begun to carve out its own success with its ITVX streaming platform. However, it is still some way behind major players such as Netflix, Amazon Prime, and Apple TV.

Another issue for ITV is the fact it has had its fair share of negative publicity in recent times. Although this may not impact earnings directly in some cases, negativity can impact investor sentiment and potential growth aspirations.

An income stock I like for returns and growth

ITV has had some issues in the past, but I believe it could be a great addition to my holdings. I’ll be buying some shares soon.

ITV’s passive income opportunity, as well as the direction of the business moving forward, and some of the resilience it has shown recently make it a no-brainer for me. At just 72p a share, there is not much risk for me to buy a small handful of shares.

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