2 top dividend stocks I’d buy in February

I believe, dividends from WPP plc (LON: WPP) and Tui AG (LON: TUI) are worth collecting as we wait for global markets to stabilise.

| More on:

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.

While analysts debate whether the volatility and sell-offs in the markets are behind us, I’m going to discuss two blue-chip companies that have had a difficult year. I believe their shares offer value and robust dividends for income.

Growth Strategy

In December, WPP (LSE: WPP), the world’s leading multi-agency advertising group with a global market share of almost 20%, released a three-year plan, called WPP Presents Strategy for Growth.

The company will now invest more in technology and cut jobs as well as operating expenses to boost profit margins. It will also re-invest around half of the expected savings of £300m over the next three years back into the business.

Should you invest £1,000 in TUI right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if TUI made the list?

See the 6 stocks

The advertising industry has been changing rapidly: more and more companies buy ads directly from online platforms like Facebook, Twitter, and Alphabet-owned Google. Yet WPP’s management believes that its creative vision coupled with better use of technology will enable it to capitalise on its strong ability to retain clients with a well-diversified geographic exposure.

Bargain hunters have been looking closely at this diverse company, which currently trades at just 6.1 times earnings with a dividend yield of 6.9%. The board has confirmed that it is committed to maintaining the dividend which has been increasing since 1993. Analysts and investors have cheered this restructuring plan as they believe the company will be able to turn around the shares that are down almost 35% over the past year.

Travel Worries

Last week, international travel group Tui (LSE: TUI) issued a surprise profit warning and sent its stock down sharply to add up to the Anglo-German group’s shares having lost almost 40% of their value over the past year.

Management blamed the seasonal and volatile nature of the holiday industry, including the summer heatwave of 2018 and a weaker pound for more Britons choosing to holiday in the UK instead of travelling abroad.

As a vertically integrated operator, the firm offers products and services for “all stages of the customer’s holiday,” including planning, booking, accommodation, flights, and other travel-related activities.

The company now trades at just 8.4 times earnings with a dividend yield of 7.6%.  It has confirmed that it will continue to increase its dividend in line with adjusted earnings. With about £2.3bn of cash on its balance sheet, it has sufficient liquidity to meet its highly seasonal working capital requirements.

It is possible that the global, as well as the UK tourist industry, could suffer further amid the slowing world economy and continuing Brexit saga. However, I believe that any bad news that is specific to the company or the industry is already baked into the share price.

Furthermore, TUI has been proactive in focusing on increasing its offerings, including the number of cruise ships, hotel, and destinations. Therefore I expect it to build on its dominant position as the tour operator of integrated “holiday experiences” in the European travel market.

The bottom line

I believe that offering technologically advanced customised solutions, as WPP has proposed, will be one of the important ways advertising agencies can achieve further organic growth. And as the dust around Brexit settles, travel operators such as TUI should be able to benefit from UK holidaymakers’ love of travelling abroad.

With their high dividend yields, I think both could find a place in the portfolios of investors who are in it for the long haul.

Investing in AI: 3 Stocks with Huge Potential!

🤖 Are you fascinated by the potential of AI? 🤖

Imagine investing in cutting-edge technology just once, then watching as it evolves and grows, transforming industries and potentially even yielding substantial returns.

If the idea of being part of the AI revolution excites you, along with the prospect of significant potential gains on your initial investment…

Then you won't want to miss this special report inside Motley Fool Share Advisor – 'AI Front Runners: 3 Surprising Stocks Riding The AI Wave’!

And today, we're giving you exclusive access to ONE of these top AI stock picks, absolutely free!

Get your free AI stock pick

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.

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. tezcang has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended Alphabet (A shares), Alphabet (C shares), Facebook, and Twitter. 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

Investing Articles

How much do investors need in an ISA to earn a £2,500 monthly passive income?

Charlie Carman explores how investors could strive for £30k in tax-free passive income each year from a dividend stock portfolio.

Read more »

Investing Articles

How much would a 45-year-old need to invest in an ISA to earn a £1k monthly passive income at 65?

Harvey Jones looks at how much an investor would need to put away every month to build a steady passive…

Read more »

Investing Articles

3 things to do ahead of the new 2025-26 ISA year

It's time for us all to put on our investing boots and get to work on developing our plans for…

Read more »

Older couple walking in park
Investing Articles

Is £150,000 enough to generate £1,000 a month in passive income?

Stephen Wright takes a look at three UK stocks with dividend yields above 8% that passive income investors might be…

Read more »

Investing Articles

Aim to earn a £50k second income in retirement by investing just this much each month

Even with a small monthly investment, it’s possible to earn a £50k second income with a successful investment strategy and…

Read more »

Man writing 'now' having crossed out 'later', 'tomorrow' and 'next week'
Investing Articles

Down 22% in a month! Is this my chance to buy shares in this FTSE 100 outperformer?

Shares in InterContinental Hotels Group have outperformed the FTSE 100 over the long term. So is a chance to buy…

Read more »

Investing Articles

How much would Tesla stock be worth if it was valued like Nvidia?

The market seems to view Tesla as a tech stock rather than a car manufacturer. What could this mean for…

Read more »

Investing Articles

This ex-penny stock skyrocketed 900% in 2020! Is it about to surge again?

This subdued hydrogen penny stock was hot in 2020, but with demand for green hydrogen rising in Europe, can the…

Read more »