Here’s how much I’d need to invest in ITV shares to earn a £100 monthly income

ITV (LSE:ITV) shares have had a positive start to 2023, posting a 7% gain so far. The company is one of the biggest FTSE 250 constituents by market capitalization. A return to FTSE 100 index could be on the horizon if stock prices continue to grow.

But the main attraction of this media stock for me is its 6% dividend yield. That is higher than the average yield offered FTSE 350 sharing.

So, if I want to aim for £100 in passive income per month, how many ITV shares should I buy? Let’s explore.

Dividends

The next dividend payment on ITV Corporation shares is due in 2022. However, the resumption of the company’s interim dividend means the total payout to shareholders has increased to 5p.

In today’s results, to target £1,200 in annual dividend income, I need to invest £20,000 in the company – an amount that matches my Stocks and Shares ISA allowance. Currently, the ITV share price is 83.22p, which means I can buy a total of 24,001 shares for a total of £20,000 to invest.

That said, using all of your annual ISA allowance to invest in one company is not a preferred strategy. I believe there is merit in portfolio diversification, and I would like to spread my money across several dividend stocks, rather than concentrating all my spare cash in one company.

However, the above calculations show the type of investment I need to make in ITV shares to secure £100 in passive income per month. Moreover, these figures may look more attractive in the future, given ITV’s ambition to grow its dividend over the medium term.

Where next for ITV shares?

The broadcaster’s full year results for 2022 contain some encouraging numbers. External revenue saw an 8% increase to reach £3.73bn. Growth was particularly encouraging in the ITV Studios division, with total organic revenue in constant currency up 14%.

The successful launch of a new streaming service, ITVX, bodes well for the future despite analysts’ initial concerns that the company will struggle to gain a foothold in a competitive market. Streaming now makes up more than five times ITV’s total revenue – a huge increase from its 13% share in 2021.

In the first two months after its launch, ITVX attracting 1.5m new users. It also helped lift the company’s total streaming hours by 69% year over year. I am excited to see how ITV taps into the substantial demand with new shows and movies to expand the audience.

One concern is the decline in linear advertising revenue. A bleak macroeconomic outlook may mean that ITV will continue to see slow activity in generating income from promotions.

At £1.49bn, total advertising revenue is less than where it has been for most of the past half decade. However, the consistent growth in digital advertising revenue alleviates my concerns and I am optimistic that ITV can capitalize on this trend in the coming years.

Should I buy this stock?

Although there is a risk, ITV share looks attractive today. Moreover, bumper dividend yields are especially tempting.

If I had the money, I would invest in the company now.