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It’s always hard to keep a cool head when the FTSE 100 seems to be falling further every day. But it’s when times are tough that the best investors make money.

By sitting tight and buying more shares where you see good value, you can position yourself for bumper profits when the market does recover. It’s worth remembering the market always looks forward. If you sell everything today and wait for some good news on the coronavirus outbreak, you may find share prices racing ahead before you can start buying again.

I won’t be selling any of my shares. But I have been buying stocks where I think good value is on offer. Today, I want to look explain why Aviva (LSE: AV) and ITV (LSE: ITV) are both on my buy list.

Follow the cash

FTSE 100 insurer Aviva has been out of favour with investors for years as it’s struggled for growth. But the company’s profitability and cash performance have improved and are expected to rise further over the next few years. This has led to a situation where I think the shares look far too cheap.

The recent sell-off has seen the Aviva share price fall to under 370p, at the time of writing. This puts the stock on a price/earnings ratio of 7, with a dividend yield of 8.1%.

The group has yet to release its 2019 results but, based on performance during the first half of last year, I expect Aviva’s forecast dividend of 31p per share to be covered comfortably by surplus cash.

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What about growth?

It’s true that Aviva has failed to deliver growth, while peers such as Prudential and Legal & General have performed much better. However, chief executive Maurice Tulloch has promised to improve the group’s performance. He’s restructured the UK business into two more-focused divisions and plans to sell some of the group’s smaller Asian units.

Aviva is unlikely to become a dynamic growth stock. But I think it has the potential to deliver steady gains and a very generous dividend income. This stock is already one of my largest positions, but while the shares remain under 400p, I hope to buy more.

A fuzzy picture

Broadcaster and producer ITV has a growth problem too. The company makes an increasing amount of money by selling programmes produced by its ITV Studios business. But investors are still unsure about the future profitability of its broadcast and streaming operations.

Competition from the likes of Netflix means television viewers are not restricted to terrestrial channels like they used to be. And lower advertising revenues mean profit margins have slipped in recent years.

I share these concerns. But I think it’s worth remembering ITV remains a highly profitable business. Over the 12 months to 30 June, ITV generated an operating margin of 18% and a return on capital employed of nearly 28%. Full-year profits are expected to be north of £500m.

As I write, ITV shares trade on less than 10 times forecast earnings and offer a dividend yield of 6.5%. I think that’s very cheap for such a profitable business. If chief executive Carolyn McCall can return the business to growth — as I expect — then I think the ITV share price should rise significantly.

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The post Why I’d buy the Aviva share price’s 8% yield during this FTSE 100 slump appeared first on The Motley Fool UK.

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Roland Head owns shares of Aviva and ITV. The Motley Fool UK owns shares of and has recommended Netflix. The Motley Fool UK has recommended ITV and Prudential. 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.

Motley Fool UK 2020