How Does WPP plc (LON:WPP) Fare As A Dividend Stock?

There is a lot to be liked about WPP plc (LON:WPP) as an income stock, over the past 10 years it has returned an average of 3.00% per year. The company currently pays out a dividend yield of 4.98% to shareholders, making it a relatively attractive dividend stock. Does WPP tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis. Check out our latest analysis for WPP

5 questions to ask before buying a dividend stock

If you are a dividend investor, you should always assess these five key metrics:

• Does it pay an annual yield higher than 75% of dividend payers?

• Has it paid dividend every year without dramatically reducing payout in the past?

• Has dividend per share amount increased over the past?

• Is its earnings sufficient to payout dividend at the current rate?

• Will the company be able to keep paying dividend based on the future earnings growth?

LSE:WPP Historical Dividend Yield June 21st 18

How does WPP fare?

The current trailing twelve-month payout ratio for the stock is 41.65%, meaning the dividend is sufficiently covered by earnings. Going forward, analysts expect WPP’s payout to increase to 50.42% of its earnings, which leads to a dividend yield of 5.23%. However, EPS is forecasted to fall to £1.08 in the upcoming year. Therefore, although payout is expected to increase, the fall in earnings may not equate to higher dividend income.

If dividend is a key criteria in your investment consideration, then you need to make sure the dividend stock you’re eyeing out is reliable in its payments. Whilst its per-share payments have increased during the past 10 years, there has been some hiccups. Investors have seen reductions in the dividend per share in the past, although, it has picked up again.

In terms of its peers, WPP has a yield of 4.98%, which is high for Media stocks.

Next Steps:

Considering the dividend attributes we analyzed above, WPP is definitely worth keeping an eye on for someone looking to build a dedicated income portfolio. Given that this is purely a dividend analysis, you should always research extensively before deciding whether or not a stock is an appropriate investment for you. I always recommend analysing the company’s fundamentals and underlying business before making an investment decision. There are three relevant factors you should look at:

1. Future Outlook: What are well-informed industry analysts predicting for WPP’s future growth? Take a look at our free research report of analyst consensus for WPP’s outlook.

2. Valuation: What is WPP worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether WPP is currently mispriced by the market.

3. Other Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.

To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned.