Investors hunting for a high-yield FTSE 100 dividend share to add to their portfolio will find a surprising candidate. Among the usual big payers, WPP‘s (LSE: WPP) making an appearance.
WPP always felt more like a growth stock than an income play to me. Unfortunately, its recent transformation is the result of weakness, not strength.
The advertising and media group has been battling structural change ever since driving force Sir Martin Sorrell quit under a cloud in 2018. Markets are cautious, clients are spending less, and digital rivals have cut into its once-dominant position.
Surprise income star
First-quarter results published on 25 April showed reported revenues falling 5% to £3.24bn, or 0.7% on a like-for-like basis. Revenue (less pass-through costs) dropped 2.7% to £2.48bn, with the UK and western Europe both down more than 4%.
North America, the group’s largest market, was more stable and management reiterated full-year forecasts, but growth looks in short supply.
The WPP share price is down 28% in a year and trades at a 10-year low. That largely explains the high trailing dividend yield, which now stands at 7.1%.
That yield’s well above the FTSE 100 average. The trailing price-to-earnings ratio is just over seven too, so WPP looks good value.
Only four other FTSE 100 shares yield more: M&G, Phoenix Group Holdings, Legal & General Group and Taylor Wimpey. All four already sit in my portfolio. So should I complete the set?
Analysts aren’t convinced
It’s tempting. WPP still has serious scale, employing around 115,000 people across more than 100 countries. There are signs of innovation, with £300m going into the WPP Open platform to boost its data and artificial intelligence (AI) capabilities. Margins have improved as cost savings start to filter through. Operating profit jumped 150% last year, although this was flattered by disposals. Net debt’s falling and cash flow’s stronger.
Despite those signs of progress, the mood among analysts is cautious. Of 13 offering stock ratings, just two rate it a Buy. Eight suggest Hold and three say Sell. Which is hardly a ringing endorsement.
The median one-year consensus target is 655p, up more than 19% from today’s 549p. That implies a total return of around 26% when the dividend’s included. Now it’s worth remembering, this is only a forecast. Not a guarantee.
Much hinges on the global economy. With many clients hit by soft demand and mounting political uncertainty, WPP has warned the next few months will remain tough. US tariffs are squeezing client budgets too.
Dividend drama
Income seekers should note that the total dividend has been held at 39.4p per share for two years. That’s understandable given today’s high yield, but still a concern. Before Covid, WPP had a strong dividend record. It froze payouts during the financial crisis, and slashed them by 62% in the pandemic. Otherwise, they’ve climbed this millennium.
WPP’s a tempting recovery play but recent experience has taught me that things can get worse before they get better. The shares are down 6% in the last week and investors should be willing to accept that kind of quick loss, or potentially more. I think it’s a bit too early for me to consider buying it.
