Div­i­dend re­lief lifts Voda­fone

Mo­bile tele­coms gi­ant lifts guid­ance while main­tain­ing first-half pay­out

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First-half year re­sults from Voda­fone (VOD), which helped the share price to strong gains on 13 Novem­ber, tell us one thing loud and clear. This is a story where lit­tle else mat­ters out­side the div­i­dend.

A typ­i­cal sea of ad­just­ments and foot­notes, new chief ex­ec­u­tive Nick Read’s am­bi­tion is to clean up and sim­plify the com­pany and how it presents its per­for­mance but Voda­fone is ev­i­dently still a work in progress.

It may be one of the world’s largest mo­bile net­work com­pa­nies but to be a share­holder through 2018 has been a thor­oughly mis­er­able ex­pe­ri­ence. In Jan­uary the share price changed hands at 238p, so at the price they traded at be­fore the in­ter­ims – 144.36p – it had lost 40% of its value in 2018.

By con­trast, the FTSE 100 was down just 7% over the same pe­riod mak­ing Voda­fone’s shabby per­for­mance abun­dantly clear.

Even at the cur­rent 155p, it’s still an ugly year-to-date per­for­mance and ar­guably even more stag­ger­ing given that this is a FTSE 100 mega-cap val­ued at more than £41bn even at to­day’s de­pressed lev­els.

MOD­EST EN­COUR­AGE­MENT

Voda­fone was able to hand in­vestors some cheer by nudg­ing up full year guid­ance, even if that re­lies on a new swathe of cost cuts and ef­fi­cien­cies rather than any real im­prove­ment to how the busi­ness is trad­ing.

Yet the only thing that re­ally mat­ters to in­vestors in Voda­fone is that it can keep spew­ing out hefty div­i­dends. Fears of a cut to that pay­out have weighed heav­ily on the minds of in­vestors with many pre­sum­ing, so far in­cor­rectly, that with a new man at the top a re-bas­ing of ex­pec­ta­tions was com­ing.

That it hasn’t so far is a sop for the op­ti­mists. But given the cur­rent debt pile of €31bn and costly new 5G spec­trum li­cences to be funded, we won­der for how long.

A for­ward yield of nearly 9% sug­gests the mar­ket re­mains scep­ti­cal on the sus­tain­abil­ity of the div­i­dend.

Voda­fone trades on a div­i­dend yield of 8.7% based on cur­rent con­sen­sus fore­casts

It may be one of the world’s largest mo­bile net­work com­pa­nies but to be a share­holder through 2018 has been a thor­oughly mis­er­able ex­pe­ri­ence

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