Picture supply: Domino’s Pizza Group plc
Earlier at present, the FTSE 100 index hit an all-time excessive of 8,103.92 factors earlier than easing again. Instantly, the Footsie feels again in vogue, with a significant takeover bid additionally introduced at present. Nonetheless, not all shares have loved this rising tide, together with the Vodafone Group (LSE: VOD) share value.
Vodafone is unstable
Vodafone’s one-year share chart, one can see its trajectory is heading south, however with a good quantity of zig-zagging alongside the way in which.
At its 52-week excessive, the Vodafone share value peaked at 97.05p on 3 Could 2023, but it surely’s been just about all downhill since. On 12 February, the inventory bottomed out at 62.59p, earlier than rebounding.
As I write on 25 April, the shares commerce at 70p, valuing this multinational telecoms group at £19bn. It is a far cry from its valuation on the flip of the century, when it was Europe’s largest listed firm earlier than the dotcom bubble burst.
Right here’s how the shares have carried out over six timescales:
| 5 days | +4.6% |
| One month | +1.7% |
| Six months | -5.9% |
| YTD 2024 | +1.8% |
| One 12 months | -23.8% |
| 5 years | -51.0% |
my desk, I see a share drifting and missing short-term momentum. Additionally, Vodafone shares have been a lemon in the long run, dropping virtually 1 / 4 of their worth over one 12 months and greater than halving over 5.
Vodafone’s hidden worth?
For the report, my spouse and I personal these shares, having paid 90.2p a share for our stake in December 2022. Thus far, we’re nursing a paper lack of 22.4%, which I’m not thrilled about.
The factor that drove me to purchase into this group was its dividend. On the present share value, Vodafone inventory provides a money yield of 11% a 12 months. That is virtually triple the broader FTSE 100’s dividend yield of below 4% a 12 months.
Now for the dangerous information: with a view to protect money and strengthen its stability sheet, the group’s board has determined to halve its yearly dividend from $0.09 to $0.045 subsequent 12 months. This may save roughly £1bn a 12 months in money payouts — a saving it maybe may use to trim its web debt of €36.2bn?
Regardless of the halving of future dividends, the Vodafone share value has held up not too long ago. That’s as a result of the corporate is promoting its Italian arm to Swisscom for €8bn, earmarking half of this sum for share buybacks.
May the shares hit £1?
Shopping for again €4bn of its shares would scale back the scale of Vodafone’s share base by round 18%. All else being equal, this might enhance future earnings per share by 22%.
Additionally, I’m hopeful that the group’s plan to merge its UK operations with these of CK Hutchison-owned Three will get approval from the UK’s Competitors and Markets Authority. If this £15bn-merger does undergo, then it would enhance the shares.
Nonetheless, as I mentioned earlier, Vodafone has been a long-term loser for shareholders. It has struggled to develop its revenues, income, and money flows over time, whereas its web debt is a significant burden.
That mentioned, if CEO Margherita Della Valle can efficiently execute her turnaround plan, then the Vodafone share value may clear £1 once more. However I gained’t be holding my breath till then!
