WPP PLC: High-Yield Dividend and Turning Earnings Signal Buying Opportunity

Investors seeking stability in a volatile market should take a close look at WPP PLC (WPP). Despite recent headwinds, this advertising giant offers a compelling mix of a 7.1% dividend yield, signs of operational stabilization, and a stock price trading at a steep discount to its 52-week high. Let's break down why now could be the time to buy.

The Dividend: A Steady Anchor in Turbulent Waters

WPP's dividend yield stands at 7.1%, well above the sector average and a testament to its disciplined payout policy. The company has maintained an annual dividend of £0.394 per share since 2022, and despite a recent payout ratio of 206%, the dividend cover of 1.7x suggests earnings are sufficient to sustain it. While the payout ratio may worry some, the dividend's consistency over multiple years and the company's track record of prioritizing returns to shareholders make it a reliable income stream.

The yield has fluctuated between 4.7% and 11.1% over the past year, hitting its peak when the stock price plummeted. Today's 7.1% represents a 40% premium to the S&P 500 average yield, offering investors a rare blend of income and growth potential.

Earnings Momentum: The Bottom May Be in Sight

While WPP's Q2 2025 revenue declined 5.5%–6.0% on a like-for-like basis (excluding pass-through costs), the worst appears to be over. The company cited macroeconomic pressures and weaker net new business as key drivers of the decline. However, management has implemented cost-saving measures—such as restructuring WPP Media—which are projected to generate £150 million in annual savings. These moves, combined with stabilization in global advertising spend, could set the stage for a rebound.

The full-year guidance now projects a 3%–5% decline in LFL revenue, narrower than the initial 2% decline estimate. While not a strong beat, this signals that the company is navigating the storm and positioning itself for recovery. With severance costs behind it and a focus on profitability, investors can reasonably expect a narrowing of the revenue gap in the second half of 2025.

Valuation: A 36% Discount to Its Peak

WPP's stock price has fallen 36% from its December 2024 high of £56.55, settling at £35.82 as of July 2025. This drop has created a rare opportunity to buy a dividend stalwart at a 52% discount to its peak yield (now 7.1% vs. 11.1% in April). The company's price-to-earnings ratio has compressed significantly, making it one of the cheapest in its sector.

Investment Thesis: Buy for Income and Turnaround Potential

WPP is a buy for income-focused investors with a time horizon of 12–18 months. The dividend provides a cushion against further declines, while the stock's deep discount offers room for recovery. Key catalysts include:

1. Cost Savings: The £150 million in annualized savings from restructuring could boost margins.
2. Market Share Recovery: WPP's scale and global presence give it an edge in capturing advertising spend as economies stabilize.
3. Dividend Safety: Even with a high payout ratio, the dividend's consistency and cover ratio suggest sustainability.

The Bottom Line

WPP's combination of a 7.1% dividend yield, improving operational discipline, and a stock price at a multi-year low creates a compelling entry point. While risks like macroeconomic uncertainty remain, the reward-to-risk ratio here is strongly tilted in favor of buyers. For those willing to look past short-term volatility, WPP could be a dividend-driven winner in 2025 and beyond.

Action to Take: Buy WPP shares on dips, with a stop-loss at £33.50 to protect against further declines. Consider dollar-cost averaging into the position over the next few months.