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This FTSE 100 growth and dividend stock is far too cheap to miss

Advertising agency WPP (LSE: WPP) may still be suffering revenues strain across most of its regions, but with marketing spend predicted to recover from 2018 I reckon now could be the time to pile in.

The FTSE 100 share has shed 25% of its value since the start of the year, but I think investors have been a bit hasty in selling up given its reputation as a dependable earnings generator, and the steps it is undertaking to create electric profits growth in the years ahead.

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WPP remains active on the M&A front to boost its already-considerable worldwide presence as well as its exposure to fast-growing niches like digital (its latest move saw its J. Walter Thompson Company arm buy Brazilian digital agency Enext in November, a specialist in e-commerce and i-cloud marketing solutions).

Indeed, WPP can look to its considerable emerging market presence, not to mention its strong foothold in North America, to deliver brilliant sales growth.

Marketing marvel

So WPP is in great shape to deliver exceptional profits improvements in the future, by the looks of things. But that is not to say investors don’t have anything to look forward to in the more immediate term.

Indeed, the ad giant is predicted to report earnings advances of 5% in 2017 and 8% next year. And current forecasts result in a dirt-cheap prospective P/E multiple of 11.3 times, falling well below the widely-accepted value watermark of 15 times.

And these promising estimates are expected to provide WPP’s progressive income plan with fresh fuel (dividends at the business have doubled in five years). Last year’s 56.6p per share payout is expected to grow to 60.3p in the current year and again to 63.3p in 2018.

As a consequence the agency carries monster yields of 4.4% and 4.6% for 2017 and 2018 respectively.

Callout colossus

Those seeking a growth and dividend dynamo with a brilliant future also need to take a close look at Homeserve (LSE: HSV).

The emergency callout giant is also bolstering its position across the globe, and it is in North America where it is really making tracks. Revenues jumped by more than a third here year-on-year in February-July, and Homeserve’s optimistic view of this hot growth market was underlined by its blockbuster $143m purchase of Virginia-based Dominion Products and Services in October, the firm’s biggest acquisition to date.

What’s more, the FTSE 250 business has plenty of firepower to keep the bolt-on buys coming  follow this autumn’s £125m share placing.

The City expects Homeserve to keep growing earnings by double-digit percentages, and advances of 19% and 10% are chalked in for the years to January 2018 and 2019 respectively.

And these perky profits projections lead into expectations of excellent dividend expansion. Last year’s 15.3p per share reward is expected to rise to 17.8p in the current period, and again to 19.6p in fiscal 2019.

These estimates produce healthy yields of 2.3% and 2.5%.

A forward P/E ratio of 24 times suggests that Homeserve, unlike WPP, may not be a popular pick with value chasers. But scratch a little deeper and the company seems to be trading a little too cheaply, its corresponding PEG reading of 1.3 peeking just above the bargain watermark of 1.

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Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended Homeserve. 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.

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