Stock market sell-offs can be unnerving to watch. But for proactive long-term investors, they provide an excellent opportunity to snap up bargains. I’m currently scouring the FTSE 250 for value stocks to buy following recent heavy weakness.
Britain’s second-tier share index has fallen back below 19,000 points in recent sessions. This means that some top-quality stocks are now trading for peanuts.
Here are two whose enormous dividend yields have attracted my attention.
Should you invest £1,000 in Amigo Holdings Plc 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 Amigo Holdings Plc made the list?
ITV
Forward dividend yield: 7%
Broadcasters like ITV (LSE:ITV) face a mighty challenge as viewers migrate from traditional means of watching to streaming services such as Netflix and Amazon’s Prime.
Ofcom data shows that the proportion of people watching a programme on broadcast television each week dropped from 83% in 2021 to 79% last year. This was the biggest annual decline since records began.
However, I’m confident that ITV can still thrive in this changing environment. After all, it has a great track record of success in the streaming arena.
The number of monthly active users of its ITVX platform rose 29% in the first half of 2023, to 12.5m. And soaring viewer numbers pushed digital revenues at the firm 24% higher, beating company forecasts. As investment in programming and technology rumbles on, I expect ITVX to continue delivering the goods and offset the decline of the company’s traditional operations.
Tough conditions in the advertising market pose a threat to ITV’s earnings in the near term. But I don’t expect this to affect the company’s plan to pay a 5p per share dividend in 2023.
Dividend cover falls below the widely-accepted safety benchmark of 2 times or above. However, it remains at a solid 1.7 times. And the FTSE 250 firm has a robust balance sheet, with a net-debt-to-EBITDA ratio of just 1.2 times.
As well as having a high dividend yield, recent share price weakness means ITV trades on a forward price-to-earnings (P/E) ratio of 8.3 times. This suggests excellent value to me.
Warehouse REIT
Forward dividend yield: 7.6%
Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice.
Real estate investment trust Warehouse REIT (LSE:WHR) is another dirt-cheap FTSE 250 stock on my radar today.
It carries an even larger forward dividend yield than ITV. And it trades on a price-to-earnings growth (PEG) ratio of 0.9. A reading below 1 indicates that a share is undervalued.
Rising interest rates pose a threat to the company’s expansion-led growth strategy. But I still expect the firm to enjoy excellent profits growth over the next decade.
As a specialist in storage and distribution hubs, Warehouse REIT is well-placed to capitalise on the e-commerce explosion. Indeed, like-for-like rents here jumped 5.3% in the 12 months to March. There aren’t enough warehouses and logistics spaces to meet demand, and a weak development pipeline in the UK suggests this shortage is set to last.
REIT rules mean that the company has to pay at least 90% of annual rental profits out in the form of dividends. This could make Warehouse REIT an excellent way to make passive income for years to come.
