Hunting for income? Here are 2 cheap shares with yields above 6%

Jon Smith talks through two cheap shares that have faced some struggles but could be good long-term sources of dividend payments.

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Being an income hunter might sound rather aggressive, but in reality it’s something a lot of us need to do. Keeping an eye out for lucrative stocks with above-average dividend yields can ensure that an investor gets the most bang for their buck. With that in mind, here are two cheap shares with generous yields.

Switched on

The first one is ITV (LSE:ITV). I refer to the stock as being cheap given that it’s down 45% over the past two years, and broadly flat over the past year.

The business might not be the hottest growth stock around, but it certainly isn’t heading towards bankruptcy. Operating profit for last year was £519m, which was the same as for 2021. Earnings per share did tick slightly higher from 9.4p in 2021 to 10.7p in 2022, which allowed a final dividend of 3.3p to be confirmed. This means the current dividend yield is 7.1%.

Part of what’s helping to keep ITV running is the Studios division. This is the part of the firm that produces own content, including Love Island, Line of Duty and The Voice. Growth is coming not just from the UK, but in pushing shows abroad, such as in the US (where revenue grew by 26% year on year).

Granted, the business is still very dependent on advertising revenue. Total ad revenue fell by 1% last year, and I feel this is the main risk to the company going forward. Yet with the continued growth in Studios and streaming, I believe this shortfall can be made up.

Rising yield

Another name worthy of consideration is Currys (LSE:CURY). The stock is currently trading at 52-week lows, just above 50p. This marks a fall of 36% over the past year.

The drop has helped to push up the dividend yield to 6.3%, well above the FTSE 250 average. In terms of problems, the company has struggled recently with performance in the Nordics. It spoke of how competitors have been heavily discounting stock, which is putting pressure on margins. As a result, it downgraded profitability in its most recent outlook.

A further headache came last month when it emerged that European competition regulators are investigating the Nordic subsidiaries.

I see these as short-term problems, however. The discounts on the stock should finish, especially as consumer demand picks up. Further, revenue generated from the Nordics isn’t as large as the UK & Ireland division. Therefore, the scope for this to blow up into a huge problem is somewhat contained.

Aside from a brief period during the pandemic, Currys has been a consistent dividend payer over the past decade. With the share price dip in recent months, I believe this makes it an attractive purchase to benefit from future income by locking in current levels.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Jon Smith has no position in any of the shares mentioned. 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.

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