Dividend paying stocks with good fundamentals and a positive future outlook could go a long way to build a passive income stream. However, it’s worth mentioning dividends aren’t guaranteed.
Two stocks I reckon are ideal to help achieve this are WPP (LSE: WPP), and Schroders (LSE: SDR).
Here’s why I think investors should be taking a closer look at both!
WPP
The business is one of the world’s premier communications services groups, specialising in advertising and public relations.
WPP shares are down 20% over a 12-month period from 929p at this time last year, to current levels of 740p. I’m not worried about the share price drop. In fact, it could be an opportunity to snap up cheaper shares.
However, the reason for the share price drop is a risk I’ll keep an eye on. The firm has experienced a drop off in performance due to rising economic uncertainty. Advertising spending across the globe has been slashed as businesses are feeling the pinch. If this continues for a sustained period, performance and returns could be dented.
From a bullish view, WPP’s position and profile in the industry is enviable. With wide coverage, and more crucially, some of the best known businesses in the world as customers, it is an industry leader. This level of experience and reputation could help boost future performance and returns.
Furthermore, a recent partnership with artificial intelligence (AI) giant Nvidia could unlock further performance growth, which could translate into higher returns. The businesses intend to collaborate to allow WPP to create content and ads quicker without compromising quality. I’m excited by this part of the investment case.
Finally, the shares offer a dividend yield of 5.3%, which is higher than the FTSE 100 average of 3.8%. I reckon once volatility cools, WPP should see performance and its share price climb.
Schroders
Asset manager Schroders is one of the oldest businesses of its kind, with roots stretching back to 1804.
The shares are down 15% over a 12-month period from 440p at this time last year, to current levels of 373p.
It has been a tough time for fund managers like Schroders recently. Continued economic turbulence has hurt customer inflows as the world grapples with higher inflation, higher interest rates, and other rising costs. This is a risk I’ll keep an eye on when it comes to the firm’s performance and return levels.
However, I reckon Schroders, like WPP, could be a great stock to buy now ahead of greener pastures ahead. Once inflation levels normalise, and interest rates are also cut, inflows, performance, and returns could also increase.
Plus, with such a storied history and track record, Schroders knows a thing or two about navigating tricky economic times. It has the nous and experience to come out of the other side of volatility and still provide shareholder value. This experience could set it in good stead.
The shares look tempting on a forward price-to-earnings ratio of 14, which is decent value for money, if you ask me. Furthermore, I think a dividend yield of 5.7% is an attractive level of return.
