Two undervalued 4.5%+ yielders you probably haven't considered

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ITV

Every investor loves dividends, but finding the market's best dividend stocks isn't easy. You need to do your research and be prepared to look under rocks other investors have ignored to find the best deals.

For example, shares in broadcasting giant ITV(LSE: ITV) are currently out of favour with investors, but that doesn't mean the group's dividend potential is any less than it was this time last year.

Above-average yield 

Shares in ITV are down by 23% year-to-date excluding dividends, as investors fret about the impact a deteriorating advertising market will have on the group's earnings. Tech giants Facebook and Google currently dominate the online advertising market, and they are growing every day at the expense of more traditional advertising formats such as television. Advertising giant WPP recently warned on profits thanks to the growing dominance of this duopoly.

Still, even though ITV is facing headwinds, the company remains one of the UK's premier broadcasters, is highly cash generative and has invested hundreds of millions of pounds in new content as well as its online services. This investment is offsetting some of the declines in advertising revenue. For the first half of the year, total group revenue fell by 3%, but a 6% increase in non-advertising revenue helped cushion the overall decline. For the period, statutory earnings per share declined by 16% as several one off factors impacted results. 

For the full year, City analysts have pencilled in a decrease in earnings per share of 9%, but even after this fall, the company's dividend yield of 4.9% is set to be covered twice by earnings per share. Net debt at the end of the first half was reported at 1.2 times EBITDA, comfortably below management's targeted maximum of 1.5 times.

Working closely 

STV (LSE: STVG) is Scotland's leading media brand, and the company works in close collaboration with ITV, sharing content across the UK. The two companies also share attractive valuations. 

Shares in ITV currently trade at a forward P/E of 10.4 while shares in STV trade as a forward earnings multiple of 9.5. And just like its larger peer, STV offers investors an attractive dividend yield of 4.5%. The payout is covered 2.3 times by earnings per share, leaving plenty of room for further payout growth.

STV is facing similar pressures to ITV, which is why the shares trade at such a low valuation. However, just like ITV, the company is working hard to try and grow in a tight market. Today the company reported that revenue for the first half fell 3% year-on-year and operating profit declined by 16%. Statutory earnings per share of the period declined 24% mainly thanks to a larger pension contribution charge of £1.2m, up from £0.2m in the year ago period.

For the first half of the year, the company's digital initiatives helped revenue from this division grow by 14%, and it now accounts for nearly 10% of overall group revenue. For the full year, management is targeting digital revenue growth of 15 to 20%. Also, license and trading agreements with ITV as well as BBC provide a "buffer against weakness in the national advertising market" according to the company's management.

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Rupert Hargreaves owns shares in ITV. The Motley Fool UK owns shares of and has recommended Alphabet (C shares) and Facebook. 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