There is something to love and hate in almost every stock, but could Vodafone (LSE: VOD) (NASDAQ: VOD.US) be a rare exception? I tried hating it, but found there was just too much to like. Here’s why.
I’m too grateful.
I find it difficult to despise a stock that has served me so well. My first slice of Vodafone, bought in August 2009, has since risen 83%, and that’s excluding dividends. The FTSE 100 returned just 37% in that time. My subsequent top-ups have also performed strongly. That’s impressive, especially for such a large company that many dismissed as an ex-growth stock, good for income only. How wrong the haters were.
And there’s more to be grateful for.
Vodafone is a growth and income machine, and there’s plenty more to come. Right now, it yields 4.4%, covered 1.5 times, and is on a forecast yield of 5.5% for March 2014. Policy remains progressive, with a recent 8% dividend hike to 3.53p a share. Big-hearted Vodafone will also hand shareholders $84 billion of the $130 billion it will receive for selling its 45% stake in Verizon Wireless. Plus £2 billion of free cash flow should continue to underpin future shareholder returns. And then there’s the small matter of the rumoured AT&T takeover….
Woodford called it wrong, and I called it right.
When City genius Neil Woodford dumped Vodafone in the summer, I leapt to its defence, claiming it was still a dividend heavyweight. Woodford doesn’t get many big calls wrong, but he did this time, selling at 171p. Today, he would have to pay 228p to buy it back, a hefty 33% more. One of his complaints was that Vodafone had denied shareholders the Verizon Wireless dividend. Shareholders aren’t complaining now.
It has a Spring in its step.
There were grounds for dislike in Vodafone’s recent interim results, particularly in Europe, where core revenues fell 3.9%, and 14.9% in the south. These are tough times, but Vodafone has unrivalled financial clout, allowing it to plough billions into extending European 3G and accelerating the roll-out of superfast 4G mobile, ahead of the recovery. Its £7 billion investment programme, Project Spring, will only use up a small proportion of its $130 billion haul from the sale of Verizon Wireless, but leave underfunded and underpowered competitors flailing in Vodafone’s wake.
And then there’s that takeover.
I had been wondering whether to bank my Vodafone profits, but that would be daft, with AT&T rumoured to be ready to lavish $175 billion to get at Vodafone’s European operations. I’ve seen takeover price estimates ranging from 265p to 340p, and I can’t find anything to hate about that. Critics say that if the takeover fails, Vodafone will go nowhere, slowly, for years. They said that before…