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A 5% FTSE 100 dividend stock and a growth stock I’d buy and hold forever

WPP (LSE: WPP) is facing the kind of disruption that it hasn’t faced since founder Martin Sorrell decided to turn what was then known as ‘Wire and Plastic Products’ from a shopping basket manufacturer back in the mid-1980s into the global advertising giant that it is today.

Ad budgets have been seriously shrinking for more than a year now, leading to charges against the FTSE 100 firm that it has been too slow in responding to the decline in traditional media forms and in embracing digital communications more effectively.

But what’s really shaken WPP is the departure of Sorrell as he was embroiled in an investigation into possible misconduct. Naturally much speculation is circulating over the direction of the marketing mammoth following its creator’s exit, while talk of a break-up of the group is also doing the rounds.

These issues have caused WPP’s market value to contract more than 40% from the all-time highs struck in March 2017. For long-term investors, however, I think now could be a great time to pile in — the company’s steady (if slow) move into the digital sphere is bearing fruit, and the exceptional revenues opportunities of its pan-global footprint and strong emerging markets exposure are also worth paying attention to.

Besides, the departure of its veteran head could provide WPP with the fresh injection of ideas that it has been crying out for of late.

Set to strike back?

And I reckon now is a brilliant opportunity for income investors to buy-in today. WPP has been a favourite among dividend chasers for many years, with shareholder rewards having risen by more than 75% during the past five years against a backdrop of constant profits growth.

Reflecting current trading troubles, earnings at the firm are expected to fall 26% in 2018, meaning City brokers are expecting the dividend to remain on hold at 60p per share.

In better news however, this projection still yields a mighty 5.3%. And looking further down the line, in 2019 WPP is expected to snap back into earnings expansion with a 4% rise, this bubbly prediction also creating expectations of fresh dividend growth as well. A 62.4p payment is currently predicted, a reading that nudges the yield to 5.5%.

Clearly WPP is not without its degree of risk. But I would argue though that this is reflected in the stock’s ultra-low forward P/E ratio of 9.5 times.

Build brilliant returns

Now Cairn Homes (LSE: CRN) may not be paying the sort of monster dividends that can be found over at WPP. Nor is it matching the colossal payouts afforded by most of London’s listed housebuilders.

However, the yawning supply imbalance in the Irish homes market still makes the business an excellent stock selection in my opinion. Furthermore, with Cairn lighting a fire under production rates profits really look likely to fly, as underlined by City forecasts.

After swinging back into profit in 2017, the builder is expected to keep up the pace this year and record an 888% bottom line improvement. A more modest 65% advance is estimated for next year, although clearly this is not to be scoffed at.

At current prices Cairn Homes deals on a dirt-cheap forward PEG multiple of 0.2 times. This is far too cheap given that its robust earnings outlook stretches a long, long way into the future.

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Royston Wild 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.