The mere thought of the State Pension is enough to give most of us the heebie jeebies. Under current rules, the most that any of us can currently receive is just £164.35 per week. It’s no wonder then that pensioner poverty is something that we need to treat seriously. It’s either that or the prospect of working for longer to mitigate the paltry size of the pension and the ever-rising claimant age.
I’ve bought into several splendid FTSE 100 dividend shares like Bunzl (LON:BNZL) and Barratt Developments (LON:BDEV) to help me retire in financial comfort and at a time that I choose. Here, I’m looking at WPP (LON:WPP) (LSE: WPP), another income stock that could give your retirement fund a significant boost.
On the mend Even during the turbulence of the past 12 months in the post-Martin Sorrell landscape my positivity towards the Footsie firm has remained unshaken. I’ve lauded the pan-global presence and its rising position in emerging markets as reasons to expect it to remain a mighty big player in the ad world. And I’ve argued that it needs a scalpel rather than a sledgehammer to get it firing again.
New chief executive Mark Read’s three-year turnaround strategy has got off to a great start. Amid long-running accusations that it had become bloated and unfocussed, WPP has engaged in 36 disposals in the last year alone to simplify its operations. The cash windfall of £850m from these sales gives the company tremendous firepower too, to double-down on its strategy of embracing technology and bolstering its creative teams to court clients.
Times may be tough in the ad market right now, and particularly in its core US market. But WPP continues to bat better than expected and full-year results released last week sailed past forecasts. That’s thanks in no small part to its capacity to keep “performing strongly” across a variety of its territories like Western and Central Europe as well as emerging markets including Asia Pacific, Latin America, Africa and Eastern Europe.
7% dividend yields! No one is pretending that the post-Sorrell WPP will suddenly transform the firm into the profits powerhouse of yesteryear though, as the sales struggles experienced during the final months of his tenure continue and Read’s recovery strategy takes time to bed in.
However, City analysts are at least expecting the earnings fightback to start here and a 5% rise is predicted for 2019. The good news doesn’t end here either, as this prediction means the dividend is expected to creep higher to 61.1p per share too, from 60p in the past couple of years. Share pickers can subsequently sink their teeth into a gigantic 7% prospective dividend yield, a figure that smashes the broader average of 4.5% for the entire FTSE 100.
What’s more, at current share prices WPP sports a forward PE multiple of 7.3 times, sitting comfortably inside the accepted bargain watermark of 10 times or below. Such a low rating provides plenty of upside in my opinion, and I expect its market value to begin swelling again sooner rather than later.
Royston Wild owns shares of Bunzl and Barratt Developments. 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.
Motley Fool UK 2019