WPP share price: Hargreaves Lansdown flags potential dividend risk

Analysts weigh in on ad giant after group’s latest results

WPP share price: Hargreaves Lansdown flags potential dividend risk

Hargreaves Lansdown argues that dividend cuts may be needed to reduce WPP’s (LON:WPP) debt, Citywire reports. The comments came after the advertising giant updated investors on its recent performance yesterday, posting a drop in profits and reported revenue.

WPP’s share price took a hit following the results, giving up 6.27 percent to close at 1,196.50p and weighing on the benchmark FTSE 100 index which ended the session 0.62 percent lower at 7,457.86 points. The group’s shares have given up more than 15 percent of their value over the past year, as compared with about a 0.6-percent gain in the Footsie.

Hargreaves Lansdown weighs on WPP

Citywire quoted Hargreaves Lansdown analyst Nicholas Hyett as commenting that investors would not know the full plan to “get WPP back on track until later this year but there are several areas that need attention”.

“Net debt is expected to shrink, which is likely to mean further asset sales, and with dividends already above the target payout ratio, that might come at the expense of growth in the payment to shareholders,” the analyst pointed out.

The comments came after WPP’s newly-appointed chief executive Mark Read said yesterday his focus would be on ‘invigorating’ the company “and returning the business to stronger, sustainable growth”. Read was appointed to the top job at the FTSE 100 group this week, following Sir Martin Sorrell’s departure earlier this year.

Other analysts on advertising giant

Kepler Capital Markets reaffirmed WPP as a ‘buy’ following the results, without specifying a price target on the shares, while Liberum Capital also continues to see the ad giant as a ‘buy,’ valuing the stock at 1,750p. According to MarketBeat, the blue-chip group currently has a consensus ‘hold’ rating and an average price target of 1,489.12p.

As of 08:01 BST, Wednesday, 05 September, WPP PLC ORD 10P share price is 1,196.50p.

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