There are two UK shares that I’d never thought much about until a couple of months ago.
The first is WPP (LSE:WPP), which is the world’s largest advertising company. Its clients include Nestlé and American Express. The second is Legal & General (LSE:LGEN). This London-based company has been providing financial services since 1836.
These UK shares aren’t exactly the FTSE 100’s most exciting constituents, but they’ve certainly caught my eye.
An impressive recovery from the pandemic
The pandemic hit WPP hard, but its cost-cutting has started to pay off in recent months. This has helped it reduce debt by £1.2bn in just a year, while its profits have recently approached £500m. This is huge when compared to losses of nearly £3bn in 2020.
This return to profit had further benefits. It meant the company could increase its interim dividend by 25% in 2021. At the time of writing, WPP’s dividend yield sits at 2.42%. This is on the lower end of the spectrum for UK shares. However, this is more encouraging than a less stable company offering huge dividends to draw in investors.
That said, as I mentioned earlier, the pandemic had a harsh impact on WPP. Should new variants cause further lockdowns, there could be a serious hit to its share price.
Luckily, the company’s share price has already managed to return to 2019 levels, which is more than can be said for many other UK shares. This reassures me that it has the ability to overcome issues and remain strong.
Despite this, its current price of 991p is 44% lower than its price of 1,780p exactly five years ago. My colleague Alan Oscroft theorised that this could be to do with institutional investors lacking confidence in its current management following the 2018 departure of Sir Martin Sorrell. This needs to be addressed.
One of my favourite UK shares for dividends
Like WPP, Legal & General has found itself in a strong position during 2021. Profits have gone from £946m in the first half of 2020 to £1.07bn in the first half of 2021. This isn’t a return to 2019 levels – it’s a 7% increase!
Plus, unlike WPP, its share price is up 30% in the last five years. For a company consistently providing impressive dividends, this is steady growth.
Its current dividend yield of 6.34% is exciting to many investors in UK shares. Not only is the company aiming to continue growing its dividend, but it is so well covered by earnings that it isn’t slowing business development or at risk of being cut.
My colleague Christopher Ruane also pointed out that Legal & General was one of the only insurance firms to maintain its dividend during the pandemic. This proves a commitment to its shareholders.
Of course, insurance firms pop up everywhere. The competitive nature of the industry means that newcomers could theoretically steal market share at any time, which could have a huge impact on Legal & General. Also, the fact that its share price often moves with the broader economy means that larger-scale financial issues could impact the company more than other UK shares.
On the whole though, these are two UK shares I’m very keen to add to my portfolio.