As a value and income investor, I’m always seeking under-valued shares offering generous dividend yields. For me, the UK stock market looks cheap, hence the FTSE 100 and FTSE 250 are my core hunting grounds for finding good businesses at fair prices.
Within the mid-cap FTSE 250, I found seven stocks offering dividend yields above 10% a year. However, I tend to steer clear of stocks with double-digit cash yields, as history teaches me that such high payouts often get slashed in troubled times.
Delightful dividends
I’m aware of two other problems when hunting for dividend shares. First, not all listed stocks pay dividends, though most FTSE 100 shares do. Second, future dividends are not guaranteed, so they can be cut or cancelled at short notice. This happened widely during the 2020/21 Covid-19 crisis.
Nevertheless, my family portfolio contains around two dozen FTSE 350 shares held for their lowly valuations and/or market-beating dividends. One of these is ITV (LSE: ITV) stock, bought in June 2022 for 68.7p a share. Alas, the price performance since then has been somewhat disappointing.
ITV shares slide
As I write, the ITV share price stands at 67p, valuing the UK’s leading terrestrial commercial broadcaster at £2.5bn. This is well below the 52-week high of 88.9p, hit on 25 July. Over one year, this stock is down 7.2%, while it has dropped by 14.7% over five years.
However, the above returns exclude dividends, which are very generous from this FTSE 250 firm. After recent price drops, ITV shares offer a juicy cash yield nearing 7.5% a year — one of the highest in the London market.
Now for the catch: this share trades on 14 times trailing earnings, delivering an earnings yield of 7.1% a year. In other words, the current cash payout is not covered by historic earnings, perhaps hinting at potential dividend cuts to come.
A recovery play?
From the above numbers, some investors might view ITV stock as a classic value trap. I can see why, but hope that it could be a long-term recovery play instead.
On Thursday, 6 November, ITV released a trading update for the first nine months of this year. For late 2025, the broadcaster expects advertising revenues to fall 9% year on year, hit by companies reining in spending before the UK Budget on 26 November. Christmas marketing campaigns usually make the fourth quarter ITV’s most profitable.
As a result, the group intends to cut costs by £35m to offset lower revenues. On a more positive note, total revenues rose 2% to £2.8bn in the first nine months of 2025. This was aided by digital advertising up 15% and an 11% hike at ITV Studios, its production arm.
Although ITV is a linear broadcaster in an on-demand and streaming world, its digital and studio arms are booming. Indeed, ITV Studios might attract takeover interest from a global media group seeking cheap content and distribution. Also, the FIFA World Cup finals in 2026 should deliver a big boost to revenues, as the Euros tournament did in 2024.
In summary, I have no interest in selling this FTSE 250 share at current price levels. That’s because my optimistic two-year price target is over 100p a share!
