As an older chap, my family portfolio is fairly conservative. Also, as a veteran value investor, I tend to buy shares for two main reasons. First, my wife and I like to buy into decent companies at attractive prices. Second, we buy many stocks for their above-average dividend yields. And that’s exactly why we bought these two FTSE 250 shares in the summer.
Our worst FTSE 250 buy in 2022
In late June, my wife bought into Royal Mail Group, which changed its name to International Distributions Services (LSE: IDS) earlier this month. Unfortunately, this FTSE 250 share has crashed hard since we bought it.
At their 52-week high, shares in the UK’s universal postal provider peaked at 531.4p. After they fell steeply, we bought in at 272.8p. Alas, IDS stock continued to plunge, hitting a 52-week low of 173.65p on 14 October. On Friday, this widely held share closed at 193.8p, valuing the group at £1.9bn.
Although IDS is having a tough time with UK postal strikes, it owns a highly profitable international delivery operation. To me, this business — General Logistics Systems (GLS) — will be the engine room for the company’s future growth.
For the record, this popular stock has lost more than half its value (-53.6%) over the past 12 months. As a result, it trades on a mere 3.3 times trailing earnings, for a whopping earnings yield of 30.5%. However, IDS is set to lose hundreds of millions of pounds due to strike action, so these figures are sure to worsen.
Even so, IDS shares offer a dividend yield of 10.3% a year, covered three times by earnings. Given this strong cash coverage, I expect this firm to maintain this payment for the foreseeable future. To sum up, it’s been a rotten year for ex-Royal Mail shareholders — including my family. But any kind of positive turnaround at Royal Mail could send this stock soaring once more. Meanwhile, we will keep collected our IDS dividends to spend or buy more shares!
ITV: I’m thinking value
The second FTSE 250 share we bought this summer was broadcaster and media provider ITV (LSE: ITV). Again, my wife bought this stock because it was lowly rated and offered a market-beating dividend yield. However, since buying at 68.4p in late June, ITV shares have been a rocky ride.
At its 52-week high on 12 November 2021, ITV stock briefly touched 127.19p. But it then plunged, slumping to its 52-week low of 53.97p on 29 September. On Friday, it closed at 66.82p after rebounding almost a quarter (+23.8%) from this bottom.
Despite this rollercoaster ride, my views on ITV as a classic value share have not changed. The shares are down 35.9% over the past 12 months, driving down the group’s value to £2.8bn. Meanwhile, this company’s price-to-earnings ratio has dived to 5.9, equating to an earnings yield of 16.8%.
At the current price, ITV stock offers a bumper dividend yield of 7.5% a year, covered 2.3 times by earnings. For me, if this isn’t deep value, then I don’t know what is. And despite worries about a UK recession, soaring inflation, sky-high energy bills and collapsing consumer confidence, I think ITV has a bright future. Indeed, if its shares sink again, we may buy even more.
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- 7.4% dividend yield! A FTSE 250 stock I’d buy for lifelong passive income
- Since ditching the Royal Mail name, International Distributions Services shares have crashed!
- IDS shares just crashed! Should I be buying?
- Should I buy International Distribution Services (Royal Mail) shares while they’re under 200p?
- Royal Mail shares have changed name. Will their fortunes change too?
Cliffdarcy has an economic interest in ITV and International Distributions Services shares. 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 beli22eve that considering a diverse range of insights makes us better investors.