A chunky dividend yield isn’t hard to find even with the UK stock market hovering near record territory. And one income opportunity that immediately jumps out is ITV (LSE:ITV).

After sliding roughly 20% in three months, shares in the broadcaster and production giant now offer a 7.5% yield. So why’s the yield so high? And could this be a terrific buying opportunity?

Why shares are falling

ITV’s first-half results looked fairly solid, at first glance. Revenue increased 2% to £1.9bn, while adjusted earnings per share jumped 22% to 2.2p. Importantly, its advertising business has finally returned to growth, helped by the men’s football World Cup as well as continued adoption of its ITVX streaming platform, which saw viewership surge by 27%.

So what was the problem? It was less to do with what ITV achieved and more to do with what it expects in the near future.

The outlook wasn’t particularly strong. In fact, management expects total advertising revenue to fall around 5% in the third quarter as macroeconomic pressures encourage businesses to tighten marketing budgets.

Investors are additionally digesting ITV’s proposed sale of its Media & Entertainment division to Sky. As a quick recap, this segment houses the group’s traditional television channels, streaming platform and advertising operations.

The deal should generate around £950m of cash and leave ITV Studios as a standalone global production business. But regulatory scrutiny means completion could be pushed into the second half of 2027.

That lengthy wait creates uncertainty. And without Media & Entertainment, ITV will become more dependent on the notoriously unpredictable timing of programme deliveries and licensing deals.

Is the payout safe?

For now, the interim dividend was held at 1.7p per share, while a new £100m share buyback is already underway.

The remaining ITV Studios business also has plenty going for it. Its production slate includes programmes for Netflix, the BBC, Fox, and Apple TV+, with several large deliveries and high-margin licensing deals scheduled for the second half.

As such, the Studios business is actually expected to outperform the wider production market this year. That’s definitely an encouraging sign given the strategic direction of ITV as a whole.

However, there’s an important caveat for income investors to consider. The Media & Entertainment division is currently responsible for around a third of ITV’s profits. Once that’s been sold to Sky, ITV Studios doesn’t generate enough earnings to cover current shareholder payouts. And as such, there’s a good chance that dividends will be revised downward once the deal closes.

So what should investors do?

My verdict

ITV could unlock substantial value if regulators approve the Sky deal and its packed production schedule delivers as planned. Obviously, there’s no guarantee of success, but ITV does have a good track record when it comes to making addictive shows.

For income investors, the current dividend yield does look vulnerable to a downward adjustment simply because the streamlined business likely won’t generate sufficient cash flows on day one to maintain it. At least, that’s what I think. But given enough time, dividends could rise again in the long run.

In my opinion, this looks more like a growth opportunity to consider rather than an income one. But luckily, there’s a far more exciting high-yield stock that’s caught my eye…

What income stock do we like better than ITV right now?

One of our Share Advisor analysts has just released a brand new stock report that we think is a must-read for any investor looking to try and generate potential income.

And the best bit is that you can see if for yourself, right now, absolutely free of charge!

No jargon. No hard sell. Just a clear look at an income share we think is worth your time.

Zaven Boyrazian does not hold any positions in the companies mentioned.