The WPP share price dips as profits fall. Here’s why it could be a top dividend buy

I’m starting to think the WPP share price undervalues the stock, especially if the long-term dividend outlook comes good.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Young Black man sat in front of laptop while wearing headphones

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

The WPP (LSE: WPP) share price is way down from its heights of 2017.

And, even though it was picking up a bit in 2024, it turned tail again on 22 February.

The market didn’t seem to like the firm’s FY 2023 results, and the shares lost 3% in morning trading.

Long-term value?

I’ve rated WPP highly in the past. But I let it drop off my radar in the past few years.

Its advertising, PR, and corporate communications business had been going off the boil a bit before the Covid crisis.

And there have been so many other top FTSE 100 buys in recent years, I just can’t keep up with them. But I’m looking at the stock again in light of this latest update.

And I see decent performance in the past few years, which suggests there’s a robust business and a good safety margin here.

Headline figures

There was a big difference between the 2023 reported and headline figures. And that can make it harder to get our heads round a set of results.

As reported, profit before tax crashed 70%, with diluted earnings per share (EPS) down 84%. On headline measures, though, we saw just a 4.8% dip in both profit and EPS.

Total revenue rose 2.9%, with like-for-like up 3.2%. With the tail-end of recession still with us, I think that could bode well for a few years of better profits now.

I see other upbeat signs too, one of which is the dividend.

Progressive dividends

WPP maintained its dividend at 39.4p, for a yield of 5% on the previous close. It’s about 2.4 times covered by that headline EPS figure.

It’s not close to being covered by reported EPS, though that apparently “includes the impact of accelerated amortisation of previously indefinite life brands and impairment of leases related to the 2023 property review“. So now we know.

I do worry a bit when I hear a company talking about artificial intelligence (AI). And CEO Mark Read spoke of “our strategy to capture the opportunities of AI, data and technology…“.

Still, I see no AI bandwagon bubble here. And WPP’s business is surely one that could benefit from AI developments.


The firm’s outlook for 2024 doesn’t show much change from 2023. I guess that might be why the market was less than enthusiastic on the day.

But broker forecasts show steady rises in earnings and dividends in the next few years. And they suggest strong cover by earnings too.

We’re looking at a forecast price-to-earnings ratio of 11, dropping to 8.5. The City expects a dividend yield of 5.2% by 2025 too. And I suspect that might be revised upwards after the 2023 dividend came in a little higher than expected.

Long-term buy?

I see plenty of risk at what looks like a turnaround point, as WPP’s market is still far from stable. The lack of a more positive outlook for this year could hold the WPP share price back too.

But I do think this could be a nice long-term dividend buy. I’ll have my eyes peeled to see how 2024 goes.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Alan Oscroft has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.

More on Investing Articles

Union Jack flag triangular bunting hanging in a street
Investing Articles

Down 28% in a week! What’s going on with the share price of this FTSE 250 British icon?

There’s one stock in the FTSE 250 that took a bit of a battering last week. But I’m not surprised,…

Read more »

Two white male workmen working on site at an oil rig
Investing Articles

At around £28.50, Shell’s share price looks cheap to me

Shell’s share price still looks undervalued against its fossil-fuel-focused rivals to me, despite it pushing back its carbon reduction targets.

Read more »

BUY AND HOLD spelled in letters on top of a pile of books. Alongside is a piggy bank in glasses. Buy and hold is a popular long term stock and shares strategy.
Investing Articles

433 shares in this FTSE 100 dividend superstar could make me £18,803 in annual passive income!

This overlooked FTSE 100 gem has one of the best yields in the index, looks undervalued, and makes me big…

Read more »

Investing Articles

2 under-the-radar investment trusts I’d buy for a new Stocks and Shares ISA

Here are two fantastic trusts that I'd happily snap up today if I were building a Stocks and Shares ISA…

Read more »

Smiling young man sitting in cafe and checking messages, with his laptop in front of him.
Investing Articles

If I’d put £1k in Games Workshop shares 5 years ago, here’s how much I’d have now!

Games Workshop shares have proved to be a stellar investment in recent years. Charlie Carman examines whether this trend can…

Read more »

White female supervisor working at an oil rig
Investing Articles

With the Middle East in crisis, will the BP share price soar?

The BP share price has leapt by a sixth, surging 16.7% since the lows of late January. Will it gush…

Read more »

Young Caucasian woman at the street withdrawing money at the ATM
Investing Articles

If I’d put £5,000 into Santander shares 1 year ago, here’s how much I’d have now

Santander shares have outperformed over the past 12 months, leaving this Fool wondering if he should add the bank stock…

Read more »

Man writing 'now' having crossed out 'later', 'tomorrow' and 'next week'
Investing Articles

55% below its all-time high, this growth stock doubles up as a value investment

Oliver says Kainos Group is one of the best technology growth stocks on the British market. He says the growth…

Read more »