Here is why the investment case and share price for each attracted me.

Direct Line

For most people, the financial services company Direct Line (LSE: DLG) needs little introduction. Its iconic red telephone logo is ingrained in the mind of millions.

That is good for the business: it currently has over 9m insurance policies in force. I like the economics of the general insurance business in which Direct Line competes. Demand for lines such as home and motor insurance tends to be resilient; motor insurance is mandated by law for most vehicles. If an underwriter has sufficient volume, it can usually predict claims volume as a percentage of policies and price its services accordingly.

That helps explain why Direct Line is profitable. It has a juicy 11.2% yield to boot. That has risen thanks to a 30% fall in its share price over the past 12 months.

Car price inflation hurting profit margins concerns investors. A fall in the number of policies in force also threatens sales and profits. But as a long-term investor, I hope Direct Line can overcome such difficulties and let its underlying business model help it perform well.

Dunelm

I owned homeware retailer Dunelm (LSE: DNLM) at the start of October.

The shares have fallen a third in the past year. Perhaps that is explained by investor concerns that consumers with less spare money will cut back on purchases for the home, hurting sales and profits at Dunelm. Revenue in the most recent quarter declined 8% compared to the same period a year ago. Gross margins also fell, which could be bad for profitability.

But Dunelm is a quality operator with a proven business model. It has maintained its guidance for the full financial year, of profit before tax in line with analysts’ expectations of £130m-£193m. That would be a decline from last year’s record results but still solidly profitable. A price-to-earnings (P/E) ratio of just 10 looks attractive to me. I bought more of these FTSE 250 shares this month.

ITV

What is the future for traditional television companies?

Maybe it is continuing to run old school operations, which can still throw off large advertising revenues. Perhaps it is utilising decades of expertise to expand business by producing content, both for themselves and other media properties. It could also be moving into the digital arena.

The UK broadcaster ITV (LSE: ITV) is doing all three. The FTSE 250 company remains solidly profitable, making more than a million pounds a day on average last year in pre-tax profit. The City seems not to like the company’s strategy, though, with ITV shares falling 36% in the past year.

I do think an advertising downturn could hurt revenues and profits at ITV. But the P/E ratio of under five, combined with a prospective dividend yield of almost 8% based on management guidance, make the shares very attractive to me. I increased my holding this month.

Our worst FTSE 250 buy in 2022

In late June, my wife bought into Royal Mail Group, which changed its name to International Distributions Services (LSE: IDS) earlier this month. Unfortunately, this FTSE 250 share has crashed hard since we bought it.

At their 52-week high, shares in the UK’s universal postal provider peaked at 531.4p. After they fell steeply, we bought in at 272.8p. Alas, IDS stock continued to plunge, hitting a 52-week low of 173.65p on 14 October. On Friday, this widely held share closed at 193.8p, valuing the group at £1.9bn.

Although IDS is having a tough time with UK postal strikes, it owns a highly profitable international delivery operation. To me, this business — General Logistics Systems (GLS) — will be the engine room for the company’s future growth.

For the record, this popular stock has lost more than half its value (-53.6%) over the past 12 months. As a result, it trades on a mere 3.3 times trailing earnings, for a whopping earnings yield of 30.5%. However, IDS is set to lose hundreds of millions of pounds due to strike action, so these figures are sure to worsen.

Even so, IDS shares offer a dividend yield of 10.3% a year, covered three times by earnings. Given this strong cash coverage, I expect this firm to maintain this payment for the foreseeable future. To sum up, it’s been a rotten year for ex-Royal Mail shareholders — including my family. But any kind of positive turnaround at Royal Mail could send this stock soaring once more. Meanwhile, we will keep collected our IDS dividends to spend or buy more shares!

ITV: I’m thinking value

The second FTSE 250 share we bought this summer was broadcaster and media provider ITV (LSE: ITV). Again, my wife bought this stock because it was lowly rated and offered a market-beating dividend yield. However, since buying at 68.4p in late June, ITV shares have been a rocky ride.

At its 52-week high on 12 November 2021, ITV stock briefly touched 127.19p. But it then plunged, slumping to its 52-week low of 53.97p on 29 September. On Friday, it closed at 66.82p after rebounding almost a quarter (+23.8%) from this bottom.

Despite this rollercoaster ride, my views on ITV as a classic value share have not changed. The shares are down 35.9% over the past 12 months, driving down the group’s value to £2.8bn. Meanwhile, this company’s price-to-earnings ratio has dived to 5.9, equating to an earnings yield of 16.8%.

At the current price, ITV stock offers a bumper dividend yield of 7.5% a year, covered 2.3 times by earnings. For me, if this isn’t deep value, then I don’t know what is. And despite worries about a UK recession, soaring inflation, sky-high energy bills and collapsing consumer confidence, I think ITV has a bright future. Indeed, if its shares sink again, we may buy even more.

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.

Is it worth picking up a few shares for my portfolio at the current share price? Let’s take a look.

ITV shares look cheap

Let’s start with the valuation because this stock is very cheap. At present, analysts expect ITV to generate earnings per share of 13.7p for 2022. That means that at the current share price of 59p, the forward-looking price-to-earnings (P/E) ratio here is just 4.3.

That’s an insanely low P/E ratio, to my mind. At that multiple, ITV is priced like it’s going out of business. I don’t think the broadcaster is likely to go out of business any time soon. This isn’t a company without cash flow (adjusted cash flow was £185m in H1 2022). Nor is it a company with a massive pile of debt (net debt at 30 June was £615m). So there could be some value on offer here right now, assuming earnings hold up (more on this below).

High dividend yield

Turning to the dividend yield, this looks quite attractive. In its H1 results, ITV said that it remains committed to paying a dividend of 5p per share for 2022. At the current share price, that equates to a yield of about 8.5%. That’s a big yield. However, it’s worth noting that ITV has a patchy dividend track record, so this payout, and future distributions, are certainly not guaranteed.

Major challenges

The thing to bear in mind here however, is that ITV is facing a number of challenges right now. For starters, the company is likely to be impacted by the downturn in the UK economy. ITV generates a large chunk of its revenues from advertising and in a downturn, businesses pull back on their ad spend.

Secondly, inflation is likely to increase its costs significantly. In H1, costs in its Studios division jumped 14%. Meanwhile, content costs in its Media & Entertainment division jumped 11%. These rises translate to lower earnings, which impact a company’s share price and ability to pay dividends.

Finally, viewing habits have changed dramatically in recent years. Traditional TV broadcasting is becoming more outdated. Personally, I hardly watch any regular TV these days. Instead, I watch news on YouTube and shows on Netflix and Amazon Prime.

Now ITV is making an effort to focus on streaming. It plans to roll out its new ad-funded streaming service ‘ITVX’ platform this quarter. This will allow viewers to either watch content free of charge with ads, or pay for a subscription service. This platform could boost its revenues. However, there’s no guarantee it will be successful.

My move now

Weighing up risk versus reward here, I’m happy to leave ITV shares on my watchlist for now. The stock does look cheap, so it could experience a bounce at some stage.

However, all things considered, I think there are safer stocks to buy for my portfolio right now.

That said, it’s possible to find shares that offer the best of both worlds. Indeed, heavy stock market volatility has made it even simpler for investors to do this. Panic selling has led to top-class dividend stocks being sold off alongside the duds.

Here are two big-yielding dividend shares that I’m considering buying right now.

ITV

Broadcasting colossus ITV (LSE: ITV) could see ad revenues sink in the near term as inflation soars and consumer spending sinks. The latest Advertising Agency/WARC bellwether report in July actually reduced its ad spend forecasts for 2023. It even warned that spending could fall 1% next year.

However, as a long-term investor, there’s a lot that I like about ITV. I think the vast sums it’s investing in its streaming platforms will reap fruit as viewer habits evolve. The company already has a great track record on this front and its ITV Hub delivered 814m streams in the first half, up 8% year on year.

I also think its development of ITV Studios into a global production giant will deliver big profits. The division already has a swathe of money-spinning hits under its belt like The Voice and Love Island that it sells for big bucks. And the company continues to execute an ambitious expansion strategy to grow the unit. It bought a majority stake in nature programme developer Plimsoll in July for a cool £103.5m.

Heavy share price weakness means ITV shares trade on a forward P/E ratio of 5.8 times. On top of this, the former FTSE 100 firm boasts a terrific 8% dividend yield for 2022. I think this makes it one of the best-value dividend stocks out there.

And what’s more, 2022’s projected dividend is covered a healthy 2.2 times by anticipated earnings. This boosts my faith that the broadcaster will meet brokers’ payout forecasts.

TBC Bank Group

There are plenty of big-yielding banks for me to choose from today. Lloyds and its 5.5% forward yield is especially popular with investors seeking long-term passive income.

But I’d rather invest my money in TBC Bank Group (LSE: TBCG). Its 8.6% dividend yield for 2022 is one reason. So is its focus on the white-hot developing market of Georgia.

This is a region where financial product penetration is low, and where personal income levels are growing rapidly. It’s a combination which helped TBC Bank’s loan book rise 14.8% in the first half from the same point in 2021.

Like ITV, TBC Bank also offers excellent all-round value despite recent share price gains. On top of that 8%+ dividend yield it trades on a forward P/E ratio of 3.7 times.

What’s more, the company’s projected dividend is covered a healthy 3.1 times by anticipated earnings. I think it’s a top buy despite the problem of rising costs.

So, why did I buy more of them this week?

Strong business outlook

I think the market has been getting nervous about the outlook for the company without really considering the facts of its performance.

I do see some risks here, to be clear. Traditional television is in long-term structural decline, which could hurt the company’s future advertising revenues. It is developing more digital platforms, but that requires capital expenditure that could also hurt profitability. On top of that, a recession might mean advertisers reduce their budgets.

But as a long-term investor, I try to weigh risks against what I see as opportunities. The digital platforms should ultimately help improve ITV’s reach. Advertising may wax and wane across the economic cycle, but I continue to expect a large advertising market in coming decades and ITV is positioning itself to keep benefitting from that.

Meanwhile, the globalisation of content production means that ITV has potentially lucrative assets, from its library of past hit shows to its studio and production facilities. In that sense, the proliferation of television channels and media platforms could actually turn out to be a blessing, not a curse, for the company.

Encouraging momentum

A quick look at the firm’s interim results from July underlines much of the bullish case for ITV shares, in my opinion.

External revenue grew 8% compared to the same period last year. Its total revenues (including internally generated ones) grew twice as much. Statutory operating profit was up 46% to £228m while earnings per share doubled. The company reiterated its commitment to a 5p per share annual dividend. At the current share price, that equates to a 7.9% yield. Dividends are never guaranteed, but management clearly feels optimistic about its ability to deliver at the intended level.

Not everything was as I would have liked. Net debt grew, for example. But overall I think the interim results showed that ITV is performing well as a business.

Why I bought ITV shares

So although the market has marked ITV shares down, I see reasons to be bullish about the prospects for the company. I think it has some strong competitive advantages, such as brand recognition and unique content. It is consistently profitable. Yet the shares trade on a price-to-earnings ratio of just six.

It may take a while for the share price to improve and reflect the business potential again. But I am hoping it will. That is why I bought more ITV shares this week to increase the size of my holding.

[Just beginning your investing journey? Check out our guide on how to start investing in the UK.]

Residential Secure Income REIT 

What it does: Residential Secure Income REIT invests in residential rental properties and shared ownership homes.

By Royston Wild. The economic outlook remains extremely uncertain right now. It’s why I think buying classic defensive stocks, like residential property rentals business Residential Secure Income REIT (LSE: RESI), is still an attractive idea. 

But don’t think of this UK share as simply a reliable share to own in difficult times. A widening supply and demand imbalance means that rental income at the real estate investment trust (REIT) looks set to soar. 

This explains why City analysts expect earnings to rise 20% this fiscal year (to September 2022). They predict an 8% bottom-line increase for next year, too. 

Data from Hamptons shows that rent growth in the UK remains super strong despite deteriorating economic conditions. Average rents rose 8.3% year on year in August. Last month’s increase was also the sixth largest yearly increase over the past decade. 

Rising interest rates pose a threat to Residential Secure Income’s shared ownership operations. However, I believe the prospect of a long-running shortage of rental homes still makes these shares a top buy for investors. 

Royston Wild does not own shares in Residential Secure Income REIT. 

Scottish Mortgage Investment Trust 

What it does: SMT is an investment manager primarily trading consumer, healthcare and technology stocks.

By Hamish Cassidy. The Scottish Mortgage share price has had a rough year so far, falling 32% since January. However, the stock has been steadily rising since June, and I think it’s set to climb higher this September. 

The company’s FY22 results reported £12.5bn in total assets. Exposure to the tech sector increased, now accounting for 25% of SMT’s portfolio. With tech giants such as Tesla and Nvidia gaining strong momentum last month, I think September looks hopeful.

Consumer spending has dropped due to the cost-of-living crisis. SMT has felt the effects of this, given that consumer discretionary stocks hold the majority of its portfolio at 33.5%. However, a strong turnaround in cash inflows from financing (increasing £1.2bn) suggests SMT can excel through the remainder of this year. 

I think the fund is very cheap at 880p. The stock looks like a great long-term addition to my September portfolio.

Hamish Cassidy owns shares in Scottish Mortgage Investment Trust.

Imperial Brands

What it does: Imperial Brands is a consumer goods company selling a range of cigarettes, fine cut and smokeless tobaccos and papers

By Paul Summers: Imperial Brands (LSE:IMB) has had a stellar year relative to most UK stocks. Not that this is all that surprising. Thanks to the addictive nature of what it sells, it was only a matter of time before even growth-focused investors saw it as a great option for parking their cash while the economic clouds pass.

I wonder if there could be more gains ahead. After all, the shares still look cheap at seven times forecast earnings. A 7.4% dividend yield is also enticing considering just how high inflation is expected to rise over the next few months.

There’s clearly still risk here. Cigarette volumes are in decline and regulators are never far away. We could also see some profit taking at some point. 

So long as I spread my cash around other sectors, however, I reckon Imperial will remain one of the best defensive shares around to buy.

Paul Summers has no position in Imperial Brands.

Diploma

What it does: Diploma is a distributor of industrial parts specialising in seals, controls, and healthcare equipment.

By Stephen Wright. In my view, Diploma (LSE:DPML) is one of the best UK stocks to buy at any time. The underlying business generates strong returns and has a significant advantage over its competitors.

One of the things I love about Diploma is the fact that it doesn’t have factories and expensive plants to maintain. This is because it distributes industrial components, rather than manufacturing them.

As a result, the business generates significant amounts of cash. 92% of the cash the business brings in becomes free cash available to the company.

This is an attractive business, but it can’t be easily emulated. Diploma’s scale and the size of its inventory give it an advantage over the competition.

Its customers know that Diploma can likely get parts to them quickly and more efficiently than anyone else. That’s what sets the business apart and means that its cash flows are — in my view — likely to prove durable.

Stephen Wright does not own shares in Diploma.

BT

What it does: BT is a UK-based multinational telecoms company operating in over 180 countries.

By Dylan Hood. Rising inflation and interest rates have weighed down on stock market valuations. BT (LSE:BT-A) shares have fallen 9% year to date, and over 20% in the past six months because of this. However, when I look at BT’s underlying business, not much has changed.

The group reported a small drop in profits in its Q1 FY23 results, however, in my opinion investors overreacted to this news. The firm is still on track with its Openreach roll out, which is now in over 7m homes, and its 5G network now covers over half the UK. In addition to this, the stock trades at a much lower price-to-earnings ratio (12 compared to 20) than its biggest competitor, Vodafone. BT’s asset-rich nature also means that it can act as a hedge against inflation.

Considering all of these factors, I think that BT shares looks like they could be a solid buy for my portfolio in September.

Dylan Hood does not own shares in BT

InterContinental Hotels Group

What it does: IHG is a hospitality company that owns a number of hotel brands including InterContinental, Holiday Inn, and Kimpton.

By Edward Sheldon, CFA. There are two main reasons I’ve chosen InterContinental Hotels Group (LSE: IHG) — a travel stock — as my top pick this month.

The first is that right now, we’re seeing a massive shift in the way consumers spend their money. Instead of buying goods, like they did during the pandemic, consumers are now spending their money on services. And the travel industry is benefitting. This is illustrated by IHG’s recent H1 results. For the six months to 30 June, revenue was up 53% year on year.

The second is that the company has pricing power due to its strong brands. The ability to raise prices should help it offset inflation.

The big risk to my investment thesis is that consumer spending slows down significantly due to the cost-of-living crisis. This could have a negative impact on sales.

However, with the shares trading at just 18 times next year’s earnings forecast, I think the risk/reward proposition here to buy into is quite attractive at present.

Edward Sheldon has no position in InterContinental Hotels Group.

Hikma Pharmaceuticals

What it does: Hikma Pharmaceuticals focuses on manufacturing and selling generic, branded, injectable, and in-licensed medicines.

By Zaven Boyrazian. Hikma Pharmaceuticals (LSE:HIK) is a world-leading generics pharmaceutical business. The firm focuses on recreating existing drugs and treatments that have come off-patent to improve availability and affordability for patients.

Lately, the stock has taken a bit of beating on fears of rising competition in the United States, causing profitability to suffer. In fact, over the last 12 months, the share price has fallen by almost 50%.

However, management is in the process of ramping up investments into its high-margin injectables business. And with its branded products continuing to deliver double-digit profit growth offsetting the recent losses, I feel investors may have overreacted.

Demand for healthcare isn’t likely to disappear any time soon. Even during a recession, when consumer spending is dropping, access to medicine is still a top priority for most patients. Therefore, I feel the recent drop in the share price presents my portfolio with a lucrative buying opportunity this month.

Zaven Boyrazian does not own shares in Hikma Pharmaceuticals.

Lloyds Banking Group

What it does: Lloyds is a FTSE 100 banking group and one of the UK’s largest mortgage lenders. 

By Charlie Keough. My top British stock for September is Lloyds (LSE: LLOY). The stock has been pushed down this year as inflationary pressures have weighed on investor sentiment. And trading for below 50p, I see real value in the Lloyds share price.  

Firstly, a hike in interest rates will benefit the business. With the Bank of England recently setting rates at 1.75%, the firm will be able to charge customers more when borrowing. With the Bank looking like they could hike rates further, this is good news for Lloyds. 

On top of this, the stock also offers a higher-than-average dividend yield when compared to the FTSE 100. 

Lloyds could suffer from a slowdown in the housing market. After surging in recent times, the market has hit the brakes. As a mortgage lender, this could spell trouble. 

However, the business has made moves to diversify such as through its rental venture, Citra Living. And with a strong dividend and long-term outlook, I’d buy some shares today.  

Charlie Keough does not own shares in Lloyds.

Persimmon

What it does: Persimmon is engaged in the homebuilding business. It operates under three different brands across the entire United Kingdom.

By Andrew Woods. The shares in Persimmon (LSE:PSN) have been volatile of late, down 31% in the last three months.

In a report for the six months to 30 June, the firm reiterated that it was targeting completions between 14,500 and 15,000 for 2022. In addition, it stated that there was still strong demand for houses, reporting a forward-sales rate of 90%.

However, first-half revenue and underlying operating profit declined by 8.2% and 8.8%, respectively.

There’s also the issue of rising interest rates. This is currently set at 1.75% in the UK and may climb higher. What this potentially means is that it becomes more expensive for customers to take out mortgages. This may lead to a slowdown in the housing market and that could be bad news for Persimmon.

Nevertheless, the company has total cash of £660m and debt of just £8.3m. This gives me hope that it could easily weather any storm that comes its way in the short term.

Andrew Woods has no position in Persimmon.

ITV

What it does: ITV makes and distributes content across television and digital platforms, as well as providing facilities for third party content creators.

By Christopher Ruane. I thought the interim results released by ITV (LSE: ITV) in July made for good reading. Total revenue grew 16% compared to the same period the prior year, while external revenue was up 8% and statutory earnings per share doubled. The company affirmed its commitment to an annual dividend of at least 5p per share, which means the prospective dividend yield is now around 7.8%.

Despite that, the ITV share price has continued to drift. It now sits 45% below where it was a year ago.

Long-term structural decline in television audiences remains a threat to both revenues and profits at the business. However, ITV is in growth mode and the digital world offers lots of room for expansion. It continues to generate substantial free cash flows and I expect that to continue in coming years. I would happily buy more ITV shares to my portfolio in September.

Christopher Ruane owns shares in ITV.

Unilever

What it does: Unilever is a fast-moving consumer goods conglomerate that produces beauty products, personal care, foods, and cleaning agents. Its brands include Lynx, Ben & Jerry’s, Dove, and many more.

By John Choong. Consumers are always going to need household products, even when prices are at an all-time high. This is why I think Unilever (LSE: ULVR) is a healthy choice for my portfolio. The demand inelasticity surrounding the majority of its products means that sales figures are unlikely to get hit too badly.

This was reflected in its most recent earnings report where CEO Alan Jope revised the company’s earnings guidance upwards. The FTSE 100 giant now expects underlying sales growth for 2022 to top 6.5%, which is excellent news given the decline in retail sales data. Additionally, the conglomerate’s geographical diversity should protect its top line from declining British and European sales figures.

Therefore, Unilever shares would serve my portfolio as a defensive play as the UK enters into a recession. Its price target of £40.81 doesn’t provide much of an upside. However, it brings me a little bit more security knowing that the likelihood of my money declining by double-digit percentages is low.

John Choong has no position in Unilever

There can be many reasons why a stock goes down, but one that stands out to me is when a company loses market share and consequently doesn’t have the resources to compete any longer. This leads to weak business fundamentals, and often share-price declines.

Here are two entertainment stocks I think are in weak positions, and which I’ll therefore never consider buying for my portfolio.

AMC Entertainment Holdings

AMC Entertainment Holdings (NYSE:AMC) is the largest cinema chain in the world. It operates numerous multiplexes, including the Odeon brand in the UK. The stock went on a truly astonishing rise in 2021 as it was caught up in the meme-stock frenzy. From a low of around $2 in December 2020, its shares shot all the way to $59 just six months later, before subsequently losing 60% of their value. 

The main reason I wouldn’t buy AMC Entertainment is because I see the cinema industry continuing to be disrupted by streaming services such as Netflix and Disney. The company recently revealed that customers are spending less on snacks and beverages than they were before. If we enter a global recession, I don’t see this trend reversing. Plus, the company now has around $5.5bn worth of debt on the balance sheet!

Some investors may still like the stock because they believe that the cinema experience can never be replicated at home. However, I would argue that modern televisions and projectors — which are increasingly large, with surround sound systems and ultra-high definition — are more than a match for the big screen over the long term. Why go to the cinema when the cinema has essentially come to us in our own front rooms?

ITV

ITV (LSE:ITV) is the oldest commercial television network in the UK. The business is consistently profitable.

The company revealed its operating profit for 2021 was up 46% to £519m. That’s an impressive figure, I have to admit. And the shares do pay a dividend yield of 7%, so there are reasons for me to consider buying the stock.

The company has announced that it intends to spend £1bn a year on content for ITVX, its revamped streaming offering. The service will be free if you can put up with advertisements, otherwise you’ll have to subscribe. ITV shares dropped some 30% after this announcement. 

The main problem I see with ITV is that it is in direct competition for eyeballs with Apple, Netflix, Disney, YouTube, Amazon, social media and a wide range of gaming platforms. The strength and depth of this competition is the reason I won’t be buying this stock.

ITV does make some good content, but I’m sceptical that people will pay for a streaming service that’s traditionally been free. I also don’t think it has the budget or strength to successfully compete with the deep-pocketed giants of the streaming world already mentioned. In fact, I wouldn’t be surprised if ITV is soon swallowed up by one of them.

FTSE 250 share #1: Direct Line

Direct Line Insurance Group (LSE: DLG) is a household name, becoming a leading motor insurer since starting out in 1985. Nowadays, it also sells business, life, pet, and travel insurance under various brands, relying on its famous red-telephone logo.

But this FTSE 250 share has slumped this year, following new rules that prevent insurers from overcharging existing customers. At its 52-week high on 28 October 2021, Direct Line stock hit 318p. As I write, it stands more than £1 lower at 215.8p. Here’s how this share has performed over time:

Though this stock has bounced back lately, it has lost over three-tenths of its value over one year and is close to halving over five years. But we invested in this FTSE 250 share after these steep falls, buying in at around £2 a share. And what drew us to invest in Direct Line was its fat dividends, which the group recently confirmed are safe (for now, at least).

At the present share price, this mid-cap stock trades on an earnings yield of 9.3% and offers a market-leading dividend yield of 10.5%. Thus, this cash yield is not fully covered by earnings, so it might be cut in future (perhaps in 2023/24). Nevertheless, I’m a great admirer of this £2.8bn company, so we intend to hang onto this quality business for the long term.

Dividend stock #2: ITV

Another FTSE 250 share we bought recently was ITV (LSE: ITV). ITV is the UK’s leading terrestrial commercial broadcaster, operating six TV channels. It is also a major producer of media content, which it sells worldwide. But this cheap share has also lost a big chunk of value in recent years.

At its 52-week high, the ITV share price briefly hit 127.19p on 12 November last year. As I write, it hovers around 69.6p, having almost halved (-45.3%) since then. Here’s how it’s performed over six time scales:

Frankly, owning ITV shares has been an unpleasant experience for a long while, with the stock down over two-fifths in the past 12 months. Also, it has crashed by almost three-fifths over the last half-decade. Yikes.

However, I see potential for a turnaround (or takeover) at ITV. In the meantime, its shares look cheap to me. They offer an earnings yield of 16.8% and a bumper dividend yield of 7.2% a year. What’s more, this cash yield is covered more than 2.3 times by earnings, which is a decent margin of safety.

Finally, I expect these two FTSE 250 stocks to be fairly volatile in 2022/23, due to soaring inflation, rising interest rates and slowing economic growth. But I buy shares for the long term, so I’m not panicking just yet!

Vistry Group (8.1% dividend yield)

Demand for homes is beginning to slip as the Bank of England hikes interest rates. According to the Royal Institution of Chartered Surveyors (RICS), 25% of estate agencies saw fewer enquiries in July.

But, pleasingly for housebuilders like Vistry Group (LSE: VTY), property values continue to soar. The same RICS survey showed that 63% of agents saw prices rise, well above the long-term average of 13%.

And the consensus among respondents was that home prices will be higher a year from now too.

Rising interest rates pose a threat to the likes of Vistry. But, so far, businesses like this continue to trade robustly. This is because of a huge shortage of housing stock that I’m confident will remain in place for years to come. And in particular it should support robust demand for new-build homes.

Vistry enjoyed an 11% improvement in its average weekly private sales rate between January and June. I think the company’s big forward dividend yield and P/E ratio of 6.2 times make it a top value stock to buy.

PageGroup (8% dividend yield)

PageGroup (LSE: PAGE) is another FTSE 250 stock whose ordinary dividend yield smashes the 2.7% index average.

Business confidence is tanking across the globe as inflationary pressures rise. This, in turn, poses a significant danger to recruiters such as this. But this is a threat I think is priced into PageGroup’s current price. Like Vistry, it trades on a sub-10 P/E ratio, at 9.7 times.

Extreme candidate shortages mean the recruitment sector actually continues to thrive. PageGroup announced this week that revenues and pre-tax profits soared 28% and 80% respectively during the January-June period.

Trading is so strong that the business hiked the interim dividend and announced plans for a special dividend earlier this week. I’m very tempted to buy this bargain today.

ITV (6.9% dividend yield)

My final high-dividend stock today is ITV (LSE: ITV). The broadcaster’s fallen a long way in 2022 after exiting the FTSE 100 last September. But I think it’s a top buy despite the threat that a weakening advertising industry poses to profits.

On top of that massive dividend yield, ITV trades on a rock-bottom P/E ratio of 5.5 times. As a long-term investor, I find this value hard to ignore.

You see, I’m expecting the huge investment the FTSE 250 new boy is making across the business to deliver massive returns. It is splashing the cash on its ITV Studios arm to turn it into a global production powerhouse. And it is building its position in the lucrative streaming market with initiatives like its soon-to-be-launched ITV X platform.