There is something to love and hate in almost every stock. But today, I’m in a positive mood, so here are five things I love about Vodafone (LSE: VOD) (NASDAQ: VOD.US).
It’s about to give me lots of money
Vodafone has just sealed the biggest deal in a decade by selling its 45% stake in Verizon Wireless for $130 billion. The sale will generate around £54 billion for Vodafone investors, and I’m going to get a share. It may only be a relatively small share of that mind-boggling payout, but it will still run into four figures. Feel the love.
And that’s not the end of it
There is more dividend fun to come. Chief executive Vittorio Colao recently promised an 8% hike in the dividend, with further progression to follow. Vodafone already yields 4.9%. Every time the latest payout pops into my share dealing account, I feel all loved up.Â
For an income stock, it’s a nice little grower
If you describe Vodafone as a growth stock, some smart alec will blurt out that it still trades at half its dotcom peak of £4. That is true, given that you can buy it today for just £2.10. But if you bought at almost any point in the last five years, your holding will have grown nicely. Vodafone is up over five years (55%), three years (30%), one year (18%) and three months (16%). Critics say there is no more growth to come, and they can keep on saying it, for all I care. For the record, I originally bought Vodafone in August 2009, and that trade is up 69%. I topped up in January, and that is up 23%.
It still ain’t that expensive
Vodafone currently trades at 13.3 times earnings, nicely below the FTSE 100 average of 15.03 earnings (which gives you an average yields of just 3.54%). Forecast earnings per share (EPS) growth is weak at just 1% to March 2014, but should rise nicely to 6% to March 2015, putting the yield on a forecast 5.1%. Vodafone has been hit by its hefty exposure to Europe, but there are signs the continent is beginning to recover.
I called Vodafone right
Vodafone makes me look clever. In June, I took issue with the decision by Neil Woodford, the UK’s super-investor, to dump Vodafone. He offloaded his entire stake at £1.71 due to falling southern European revenues, concerns about data services profits, a dip in dividend cash flow cover and the decision to deny shareholders the Verizon Wireless dividend. I countered that you couldn’t blame Vodafone for Europe’s woes, data revenues weren’t that bad, the business was still churning out cash, and that dividend may be better invested in the business. The share price is up 23% since, plus I get that Verizon windfall (and he doesn’t). It’s not often you hold your own against a master investor. Why wouldn’t I love Vodafone?
Neil Woodford gets far more right than he gets wrong, so find out what shares he does like right now by downloading in our special in-depth report Eight Top Blue Chips Held by Britain’s Super Investor. This updated report is completely free and shows where Invesco-Perpetual’s dividend dazzler believes the best high yield stocks are to be found today. It won’t cost you a penny, so download it now.
> Harvey Jones owns shares in Vodafone. The Motley Fool has recommended shares in Vodafone.