It’s true that we only have a few weeks to go before the end of the year. Yet this doesn’t mean I can clock off already from my investing portfolio. There are plenty of stocks that look interesting to buy right now, to help provide investors with a second income. Here’s one that I think should be considered.
Buying the dip
WPP (LSE:WPP) is one of the largest marketing organisations in the world. Originally founded back in 1971, it’s listed on the FTSE 100. Over the past year the share price is down 18%, with a current dividend yield of 5.45%.
The fall in the share price can be partly attributed to slower growth in the US this year. Even though the business still posted a half-year profit, the weaker growth caused full-year forecasts to be revised lower. If this trend continues, it’s a risk for next year.
However, I think this fall in the stock represents a good dip to buy now. I believe the market has overreacted. After all, the full-year outlook for growth versus last year is still 1.5-3%. So it’s not like the business is contracting.
The business has a strong business pipeline, with £1.58bn of net new billings in H1. Further, the continued cost saving push is expected to save £450m in 2023 alone. When I put this all together, I don’t think the stock will remain at current low levels for a long time.
Second income potential
Another reason why I think investors (myself included) should consider buying the stock before year-end is due to the dividend potential.
The yield at present is well above the FTSE 100 average. If I’m correct and the share price does move back higher in 2024, the yield could fall.
Aside from just the share price movement, the dividend forecasts look attractive. For 2023, there were two payments of 24.4p and 15p. This totalled 39.4p.
For next year, the expectation is for 25.1p and 16.5p, a total of 41.6p. It’s likely that the first payment will be announced in February, alongside the full-year results release.
Although it’s impossible to calculate what the dividend yield could be in the future, I can try. For example, if I took the current share price and used the 2024 dividend forecast, the yield would be 5.85%.
Bringing it all together
When I put the fall in the share price together with the potential for higher dividend payments next year, it does make WPP look interesting.
The main risk to my view would be if the slowdown in spending by clients in the US spread to other markets. If China and Europe experienced similar cutbacks next year, this could negatively impact profits.
Ultimately, I think this risk is manageable. Therefore, I’m considering adding this stock to my portfolio before the end of the year.
