Media

First up is WPP (LSE: WPP), whose share price has lost 20% over 12 months.

The advertising and PR group spoke of a strong Q3 performance, posting a 10.3% rise in revenue. On a like-for-like basis, revenue gained a more modest 2.7%. The company attracted $1.7bn in new business in the quarter, and $5.1bn year-to-date.

WPP has been active on the acquisition front too, most recently buying Passport, a brand design agency in California. On top of WPP’s planned £800m share buyback in 2022, it seems there’s no shortage of cash available.

Forecasts suggest a dividend yield of around 4.5% this year. Looking at a forward price-to-earnings (P/E) ratio of under 10, I find that attractive. We do face big economic risks, though. So I might wait and see how the final quarter goes.

Silver

Fresnillo (LSE: FRES) is the world’s largest silver miner. And its shares have also fallen 20% over 12 months.

Q3 silver production dropped by 5.4%, but that was expected. And over nine months, volumes increased by 2.6%.

Fresnillo also unearths gold, lead, and zinc. Production volumes of those are all down year-to-date, which might be contributing to the share price weakness.

But the company reckons it’s still on track to meet full-year guidance for its two key precious metals. It expects silver production of 50.5 to 56.5 moz of silver, and 600 to 605 koz of gold.

My biggest concern with Fresnillo as an investment right now is the stock valuation. We’re looking at a fairly lofty P/E of around 28. But forecasts have it falling to 18 in a couple of years. And I think that would be cheap compared to Fresnillo’s long-term prospects. I think I’ll wait, and hope for further future dips.

Household goods

Household goods producer Reckitt (LSE: RKT) has seen its shares gain 9% over the past 12 months.

Q3 revenue is up 14%. And reported year-to-date revenue rose 7.6%. Like-for-like (LFL) revenue is a bit better, up 8.2%.

The company has set a full-year LFL revenue target of between 6% and 8%, narrowing its earlier estimated range. Reckitt is also targeting adjusted operating margins in the mid-20s in the medium term, and says it’s on track to achieve it. For a highly competitive retail segment, I think that would be impressive.

There’s a forecast P/E of around 16-17, dropping to 15 by 2024. That’s on the upper side of the FTSE 100’s long-term average valuation. But Reckitt has a highly defensive position, and I think it’s worth it for the safety margin.

In other circumstances, I could buy Reckitt at this valuation. I just see better bargains around right now, albeit with a bit more risk.

It’s a risk that I as an investor need to take seriously. Though recent trading news from advertising agency WPP today has gone some way to soothing my fears.

The FTSE 100 firm said that sales growth continued to accelerate from pre-pandemic levels between July and September. And encouragingly for ITV, the ad agency said UK like-for-like sales improved 4.2% year on year.

Hub talk

The question is whether ITV’s current share price fairly reflects the danger it faces. At 68p per share the company trades on a forward price-to-earnings (P/E) ratio of 5 times.

As a long-term investor I believe the company’s valuation reflects the above risk. Its better-than-expected first-half performance (when ad revenues rose 5%) has already given me reason to believe this.

In fact I think the broadcaster will experience strong share price growth over the next decade. Its ITV Hub streaming platform, for instance, is hugely popular and the company is investing heavily here to take the fight to paid-for services like Netflix.

The number of streams through ITV Hub jumped 8% between January and June to a whopping 814m. Advertising revenues via the platform are also soaring and digital ad sales jumped 20% in the first half.

Studio strength

I’d also buy the media giant for its winning ITV Studios production arm.

The division has a stellar track record of producing global hits like Downton Abbey, Love Island and The Chase. And it has a packed pipeline of potential money-spinning hits to keep revenues rising strongly (studio sales jumped 16% between January and June).

Furthermore, I like the steps ITV has taken to turn its production arm into a truly international heavyweight. ITV Studios has production bases in the US, Australia, Israel, and across Europe.

Its drive to create a diversified programming roster across genres and geographies is helping it to build a broad global audience, too.

A top dividend stock

As the title suggests, I think ITV will be a great way to build long-term passive income. It seems likely that investors won’t have to wait long for big dividends, either.

City brokers think the business will raise last year’s 3.3p per share dividend to 5p in 2022 and 2023. This creates an 7.4% dividend yield, more than double the 3.3% FTSE 250 average.

Based on predicted earnings there’s a great chance that ITV will meet these forecasts, too. Anticipated dividends are covered between 2.1 times and 2.7 times, above the minimum safety margin of 2 times.

ITV has the potential to deliver excellent shareholder returns over the next decade. With some cash to spare I’d happily but it for my portfolio right now.