Is the FTSE 100 WPP share price one of the best shares to buy right now?

Advertising and public relations firm WPP (LSE:WPP) is a big-yielding dividend star; I consider whether its share price could be set to rise.

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Advertising and PR giant WPP (LSE:WPP) has struggled in one way or another since March 2017. The world’s political uncertainties and Brexit were initially blamed for its surprisingly cautious outlook, which caused the share price to begin its descent.

After several record years of growth for the company, WPP reached the pinnacle of its success in February 2017 at over £18 per share, but then began a downward spiral. This included assignment losses among automotive, pharmaceutical, and fast-moving consumer goods clients in 2018, and several profit warnings. 

Sir Martin Sorrell

Then followed drama and scandal for the firm when its former chief executive, Sir Martin Sorrell, left under a cloud of personal misconduct allegations, which he denied. Prior to his departure, Sorrell had been the longest-serving chief executive of a FTSE 100 company.

To add insult to injury, Sorrell went on to found rival company S4 Capital.

Company turnaround plan

Now part-way through a three-year turnaround plan that has begun to show growth in the UK, WPP seems to me to be on the right track to a more profitable future.

Following the company’s interim results in August, the share price lifted 8% even though revenue had fallen 2% versus the same period in 2018. Reported pre-tax profits fell 44% to £478m, driven primarily by a “significant” gain in 2018 that wasn’t repeated, and a charge on the revaluation of financial instruments versus a credit in 2018.

Losses have narrowed in North America, which is WPP’s largest consumer base. Unfortunately, North American is also its weakest consumer base, so returning to prior glory there will likely take time. The turnaround plan has a target to return to growth by the end of 2021.

New Chief Executive Mark Read said WPP performance was slightly ahead of internal expectations but in line with full-year guidance and three-year strategic targets. 

The blue-chip company has won recent contracts and begun to strengthen its position in high-growth areas such as digital; it has expanded deals with major clients such as eBay and Instagram. WPP offers a generous dividend yield of almost 6%.

Some of WPP’s key clients include American Express, AT&T, Colgate-Palmolive, GlaxoSmithKline and Nestlé.

Company debt

One of the most off-putting aspects of WPP for potential investors is its heavy debt burden. After a recent 10% reduction, it still stacks up to more than £4.3bn.

Selling 60% of its subsidiary Kantar, a data and insight research consultancy, to Bain Capital for approximately $4bn will help further reduce this massive debt pile.

Other WPP subsidiaries include 20 companies, each successful in its own right, such as esteemed advertising agency Ogilvy, media investment firm GroupM, Mediacom, Wavemaker, Mindshare, and Finsbury.

The company has a £12.75bn market cap and a trailing price-to-earnings ratio of 18, which is up significantly from a recent ratio of 7. I believe this shows investor sentiment is improving. Earnings per share is 55.7p and the operating margin is 8%, while the profit margin is still rather low at 4.5%.

I think the beleaguered communications group is on track to make a comeback, and with its 6% dividend yield, it’s a great income stock to own in a FTSE 100 ISA. I do think it’s possibly one of the best shares to consider right now and I deem it a Buy.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Kirsteen 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.

More on Investing Articles

Passive income text with pin graph chart on business table
Investing Articles

Yields of up to 7%! I’d consider boosting my income with these FTSE dividend stocks

The London market has some decent-looking dividend stocks right now, and I’m tempted by these two for growing income streams.

Read more »

Young mixed-race couple sat on the beach looking out over the sea
Investing Articles

I’d put £20K in an ISA now to target a £1,900 monthly second income in future!

Christopher Ruane shares why he thinks a long-term approach to investing and careful selection of shares could help him build…

Read more »

Mature couple at the beach
Investing Articles

6 stocks that Fools have been buying!

Our Foolish freelancers are putting their money where their mouths are and buying these stocks in recent weeks.

Read more »

Black woman using loudspeaker to be heard
Investing Articles

I was right about the Barclays share price! Here’s what I think happens next

Jon Smith explains why he still feels the Barclays share price is undervalued and flags up why updates on its…

Read more »

Investing Articles

Where I’d start investing £8,000 in April 2024

Writer Ben McPoland highlights two areas of the stock market that he would target if he were to start investing…

Read more »

View of Tower Bridge in Autumn
Investing Articles

Ahead of the ISA deadline, here are 3 FTSE 100 stocks I’d consider

Jon Smith notes down some FTSE 100 stocks in sectors ranging from property to retail that he thinks could offer…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

Why I think Rolls-Royce shares will pay a dividend in 2024

Stephen Wright thinks Rolls-Royce shares are about to pay a dividend again. But he isn’t convinced this is something investors…

Read more »

Investing Articles

1 of the best UK shares to consider buying in April

Higher gold prices and a falling share price have put this FTSE 250 stock on Stephen Wright's list of UK…

Read more »