WPP could soon cease being a dividend stock. But after falling 63% in a year, does it offer great value?

Based on amounts paid over the past 12 months, WPP (LSE:WPP) is the top dividend stock on the FTSE 100. That’s because if you take the company’s most recent interim and final dividends (31.9p combined) and divide them by its current (31 October) share price of 294p, it implies a yield of 10.9%.

But the advertising and marketing group’s share price has fallen 63% over the past 12 months. This is the principal reason why its yield is now in double figures. And the reduction in the group’s market cap has been caused by a significant fall in its earnings. On 30 October, WPP issued a trading update for the third quarter of 2025, which made for grim reading.

What did it say?

Prior to the release, the group was expecting a 3%-5% drop in like-for-like revenue less pass-through costs. It’s now expecting a fall of 5.5%-6%. Similarly, its operating profit margin is now forecast to be 13% compared to 17% previously.

Cindy Rose, who was only appointed chief executive on 1 September, couldn’t have joined at a more difficult time. It would appear as though the rise of artificial intelligence (AI) is affecting the company by enabling more of its clients to undertake creative work themselves.

However, WPP hasn’t said this is the problem. Instead, it plans to use the technology to its benefit. It says it wants to harness its “AI advantage” to “deliver growth and business outcomes for our clients”.

But despite the challenges that it faces, the group retains an impressive list of blue-chip clients that continue to use the agency for new work. It also has a global presence with operations in over 100 countries. And WPP’s website contains plenty of case studies explaining how it’s helped its clients boost their sales.

Uncertain times

However, I think it’s hard to deny that the group’s facing a difficult period ahead. Its boss says: “I acknowledge that our recent performance is unacceptable and we are taking actions to address this.” The four-pronged turnaround strategy involves simplifying the group’s offering, improving its execution, expanding its addressable market, and strengthening its financial foundations.

The last one requires a “disciplined approach to capital allocation”. Rose says full details will be shared “early in the new year”. If that’s not a strong hint that the group’s considering suspending or cutting its dividend, I don’t know what is. WPP’s status as a dividend share looks to be under threat to me.

However, unless it can find a way of dealing with the threat of AI, I can’t see the group’s financial position improving any time soon. Whenever I look at its results, I’m reminded of comments made by Sam Altman, founder of OpenAI. In an interview for a book published in 2024, he said that AI will do “95% of what marketers use agencies, strategists, and creative professionals for today”.

But the rest of the quote is even more ominous for WPP. Altman says it could be done “easily, nearly instantly and at almost no cost”. Of course, he has a vested interest in promoting the benefits of AI. However, even if he’s only half right, WPP’s in big trouble. There’s just too much uncertainty surrounding the industry for me to want to take a position.

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James Beard has no position in any of the shares mentioned. 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.

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