As a value and income investor, I am always on the lookout for undervalued stocks that offer generous dividend yields. To me the UK stock market looks affordable, hence FTSE100 AND FTSE250 These are my main areas for looking for good companies at fair prices.

Within the FTSE 250 mid-cap index, I found seven stocks offering a dividend yield above 10% per annum. However, I tend to avoid stocks with double-digit yields because history shows me that such high payouts often get cut in turbulent times.

Great dividends

I’m aware of two other problems when hunting for dividend stocks. Firstly, not all listed shares pay dividends, although most FTSE 100 shares do. Second, future dividends are not guaranteed, so they can be cut or canceled at tiny notice. This occurred widely during the Covid-19 crisis in 2020/21.

Nevertheless, there are about two dozen in my family portfolio FTSE350 stocks held because of their low valuation and/or dividend above the market price. One of them is ITV (LSE: ITV), purchased in June 2022 for £68.7 per annum. Unfortunately, price performance since then has been somewhat disappointing.

ITV shares fall

At the time of writing, ITV’s share price is 67p, valuing the UK’s leading commercial terrestrial broadcaster at £2.5 billion. This is well below the 52-week high of 88.9p reached on July 25. The stock is down 7.2% in one year, while it is down 14.7% in five years.

However, the above profits do not include dividends, which are very generous from a FTSE 250 listed company. After the recent price declines, ITV shares offer a handsome cash yield of close to 7.5% per annum – one of the highest on the London market.

Now here’s the catch: This stock is trading at 14 times trailing earnings, which is a yield of 7.1% per year. In other words, the current cash payout is not included in historical earnings, which could indicate potential dividend cuts in the future.

Regenerative fun?

Based on the numbers above, some investors may view ITV stock as a classic value trap. I understand why, but I hope this will be a long-term recovery game instead.

On Thursday, November 6, ITV published a ratings update for the first nine months of this year. The broadcaster expects advertising revenue to fall by 9% year-on-year by the end of 2025, driven by companies cutting back on spending ahead of the adoption of the UK Budget on November 26. Christmas marketing campaigns usually make ITV’s fourth quarter its most profitable.

As a result, the group intends to reduce costs by £35 million to compensate for lower revenues. On a more positive note, total revenue increased by 2% to £2.8 billion in the first nine months of 2025. The growth was driven by a 15% raise in digital advertising and an 11% raise in ITV Studios, its production arm.

Although ITV is a linear broadcaster in the world of on-demand and streaming services, its digital and studio offerings are growing. Indeed, ITV Studios could attract acquisition interest from a global media group looking for affordable content and distribution. Additionally, the 2026 FIFA World Cup Finals should provide a powerful revenue boost, as will the 2024 Euro tournament.

Bottom line is, I’m not interested in selling this FTSE 250 share at current price levels. That’s because my hopeful two-year price target is over 100p per share!