Is this Neil Woodford-owned 6% dividend stock the biggest bargain in the FTSE 100?

Lady holding remote control pointed towards a TV
Lady holding remote control pointed towards a TV

With Brexit uncertainty showing no signs of abating, investors are apprehensive of UK stocks right now. Domestically-focused stocks, in particular, are heavily out of favour, as nobody knows how the UK economy is likely to fare when Brexit finally happens.

However, for those with a long-term view, the current Brexit uncertainty may have created some attractive buying opportunities. After all, plenty of market commentators believe that once the UK is out of Europe, businesses will just get on with things and that the British economy will continue to prosper. With that in mind, here’s a look at one FTSE 100 dividend stock that I believe is a bargain right now.

ITV(LSE: ITV) shares just continue to slide, and the stock is now down 24% year to date. As a UK broadcaster that generates a significant proportion of its revenues from advertising (ad spending is generally linked to economic growth) it’s not a huge surprise that investors have dumped the stock. But has the selling gone too far?

I believe so, and I think that ITV is now one of the biggest bargains in the FTSE 100. Here’s why.

Content king

In the past, ITV generated the bulk of its revenues from advertising, so its fortunes were tied to the UK economy. However, in recent years, the group has reinvented itself to a degree, and the company now generates a substantial amount of revenue from its content division, ITV Studios. This part of the business makes shows such as Love Island, Dancing on Ice and I’m a Celebrity…Get Me Out of Here! and sells these shows to other content providers, such as Netflix, for a fee.

ITV Studios is growing at a healthy rate and in early November, the group advised that for the first nine months of the year, revenue for this part of the business grew 10% – a solid performance. What this means is that even if advertising revenue does slow down in the short term due to Brexit (which it probably will), overall revenue is unlikely to fall off a cliff because the growth of ITV Studios’ top line should provide a buffer. Furthermore, as this part of the business continues to grow, the company will most likely become even less dependent on advertising in the future.

So, looking at ITV’s forward-looking P/E of 8.3, I think the stock looks too cheap. Investors are basically expecting the company to blow up, yet I just can’t see that happening.

Colossal dividend yield

Another reason I think ITV offers value right now is its dividend yield. Back in July, the company advised that it expects to pay out at least 8p share in dividends for FY2018 and FY2019, which at the current share price of 127p, equates to a colossal yield of 6.3%. This means that investors buying now will get a paid a very healthy yield while they wait for the share price to recover. When you consider that the median FTSE 100 forward-looking yield is 4.4%, ITV’s yield appears to offer value on a relative basis.

As such, I think ITV is a the perfect stock to buy now and tuck away for a few years. Naturally, investors are avoiding the stock now due to Brexit uncertainty, but looking five or 10 years out, I think the shares have significant recovery potential.

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Edward Sheldon owns shares in ITV. The Motley Fool UK has recommended 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.