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Dividend-paying stocks with good fundamentals and a positive future outlook could go a long way toward generating a passive income stream. However, it is worth mentioning that dividends are not guaranteed.
Two actions that I think are ideal to help achieve this are WPP (LSE: WPP), and Schroders (LSE: DEG).
Here's why I think investors should take a closer look at both!
WPP
The company is one of the world's leading communications services groups, specializing in advertising and public relations.
WPP shares are down 20% in a 12-month period from 929p this time last year to current levels of 740p. I'm not worried about the share price falling. In fact, it could be an opportunity to pick up cheaper shares.
However, the reason for the share price drop is a risk I will be keeping an eye on. The company has seen a drop in performance due to growing economic uncertainty. Advertising spending around the world has been cut as companies are feeling the pressure. If this continues for a prolonged period, performance and profitability could be affected.
From a bullish perspective, WPP's position and profile in the industry is enviable. With extensive coverage and, more importantly, some of the world's best-known companies as clients, it is an industry leader. This level of experience and reputation could help drive future performance and profitability.
Additionally, a recent partnership with artificial intelligence (ai) giant NVIDIA could unlock greater performance growth, which could translate into higher returns. The companies intend to collaborate to enable WPP to create content and ads faster without compromising quality. I'm excited about this part of the investment case.
Finally, the shares offer a dividend yield of 5.3%, higher than the FTSE 100 average of 3.8%. I believe that once volatility cools, WPP should see performance and an increase in its share price.
Schroders
The asset manager Schroders is one of the oldest companies of its kind, with origins dating back to 1804.
The shares are down 15% in a 12-month period from 440p this time last year to current levels of 373p.
It has been tough times lately for fund managers like Schroders. Continued economic turbulence has hurt customer flow as the world faces higher inflation, higher interest rates and other rising costs. This is a risk I will be watching for as it relates to the company's performance and return levels.
However, I think Schroders, like WPP, could be a great stock to buy now, before greener pastures lie ahead. Once inflation levels normalize and interest rates also reduce, capital inflows, performance and returns could also increase.
Plus, with such a rich history and track record, Schroders knows a thing or two about navigating tough economic times. He has the intelligence and experience to come out on the other side of volatility and continue to deliver value to shareholders. This experience could be very useful for you.
The stock looks tempting with a forward P/E ratio of 14, which is a good value in my opinion. Furthermore, I believe that a dividend yield of 5.7% is an attractive level of profitability.
