So far, I haven’t added WPP (LSE:WPP) shares to my Stocks and Shares ISA this year. And considering the stock’s tumbled just over 65% since January, that’s proven to be a wise move.
With the stock falling so drastically, the dividend yield’s surged to over 10%. This is a little misleading since shareholder payouts were actually slashed in half earlier this year. But even when factoring this in, the yield’s anticipated to be closer to 8.7% – almost triple the stock market’s current 3.1% average.
So now the stock price has collapsed, has this become a low-risk passive income goldmine for my ISA?
An incoming turnaround?
Let’s start by looking at how we got here. Due to a sector-wide slowdown in the advertising space, demand for WPP’s services has taken a substantial hit. And this has only been made worse by the departure of several high-profile clients.
The result’s been a series of revenue drops and profit warnings among several structural challenges. And the downfall of investor confidence has only been exacerbated by the macroeconomic forces like US tariffs, as well as CEO Mark Read’s failure to counter AI and social media marketing threats, resulting in his departure.
With that in mind, it isn’t surprising to see WPP shares struggle or dividends get slashed. But with Cindy Rose moving into the corner office, efforts to right the ship are underway.
Rose intends to reveal her full turnaround strategy in early 2026. However, she’s already highlighted where the priorities lie:
- Simplify services and offerings to address complexities and inefficient pricing.
- Nurture a high-performing employee culture through AI investments.
- Expand the firm’s addressable market by pushing into enterprise and technology solutions.
- Introduce more disciplined capital allocation with a focus on cost efficiency.
Is the new dividend safe?
On paper, this renewed focus and strategic direction sounds promising. However, as Rose said: “There is a lot to do”. And with institutional analysts remaining cautious, the outlook for WPP’s shrouded in execution risk.
As such, earnings are expected to continue falling in 2026, albeit at a significantly reduced rate. And with less excess cash flow on offer, that means dividends are also expected to take another hit, falling to 23.87p per share from the 25.45p projected for 2025.
That still puts the dividend yield at 8.1% on a forward basis. But continued underperformance by this business means that even at 23.9p, dividends could still have much further to potentially fall.
With that in mind, ‘safe’ isn’t a word I’d use to describe WPP’s dividend right now.
A risk worth taking?
With WPP shares now trading at a forward price-to-earnings ratio of just 4.9, the bar’s been set exceptionally low by investors. Perhaps too low.
I wouldn’t be surprised to see the stock deliver an explosive comeback if Rose’s strategy is a success. But right now that’s a big ‘if’. So while I think this is definitely a business worth investigating further, it’s not one I’m rushing to add to my Stocks and Shares ISA right now.
