2 FTSE 100 stocks yielding 6.7% and 7.8% I’d buy in an ISA today

G A Chester
A person holding onto a fan of twenty pound notes

When share prices fall, dividend yields rise. It’s good news for buyers, because it means you’re getting more income-bang for your buck. And for investors buying in a Stocks & Shares ISA, it also means more income protected from tax.

Advertising giant WPP (LSE: WPP), which announced its annual results this morning, is one company sporting a significantly higher yield than in the recent past. Fellow FTSE 100 media firm ITV (LSE: ITV) is another.

I believe the market’s presenting investors with two good opportunities here to buy high passive income flows, as well as long-term capital growth.

Big faller

On another day when markets have slumped, WPP’s the biggest faller on the FTSE 100. It’s currently trading at around 770p, down 15% on the day. I’ll come to the meat of its results shortly, but for starters, let’s chew on the dividend.

In line with City analysts’ expectations, the board maintained the payout at 60p. As recently as December, WPP’s shares were making a 52-week high of 1,077p, which gave a yield of 5.6%. With the share price now some 29% lower, buyers today are picking up a yield of 7.8%.

Substantial progress

Chief executive Mark Read, who’s been in the job less than 18 months, reminded us that 2019 was “the foundational year for the new WPP strategy.” The nub of it is to create a simpler structure with fewer, stronger agency brands. In the process, it aims to reduce debt by asset disposals.

Read said the company had made substantial progress during the year, and achieved its restructuring targets. He also reported year-end net debt down to £1.5bn, from £4.3bn at the start of the year.

Looking ahead, he expects to see a similar top-line and operating profit margin in 2020, before a return to growth in 2021. However, we should note the 2020 guidance is prior to any impact from the coronavirus outbreak, it being “too early to predict the full potential impact.” We’ll get an update in the Q1 results (late March/early April).

Of course, dividends are never guaranteed. However, City analysts currently expect WPP’s 60p payout to be maintained in 2020 and 2021, with a potential return to growth thereafter.

Similar proposition

Over at ITV, we’re looking at a similar proposition. The company’s expected to maintain its 8p dividend when it announces its results a week today. An 8p payout is also expected for 2020, before a return to growth in 2021.

Like WPP, ITV’s shares were making a 52-week high as recently as December. At 156p, they offered a yield of 5.1%. Today, with the share price some 23% lower at around 120p, buyers can bag a yield of 6.7%.

Executing its strategy

ITV isn’t undergoing WPP’s extent of change. Two years on from her appointment as chief executive, Carolyn McCall told us in a Q3 update that the company’s making good progress in executing its strategy of “building a digitally led media and entertainment company to create a stronger, more diversified and structurally sound business.”

I think the immediate high income makes ITV and WPP particularly attractive stocks to buy today. But I also believe both companies are following appropriate strategies, and have prospects of delivering medium-to-long-term capital growth for investors.

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G A Chester has no position in any of the shares mentioned. The Motley Fool UK has recommended ITV. 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.

Motley Fool UK 2020