Today I am outlining why Vodafone (LSE: VOD) (NASDAQ: VOD.US) could be considered an attractive addition to any stocks portfolio.
Rising exposure across emerging markets
The issue of galloping competition and increased regulation has provided a significant bugbear for Vodafone in recent times. However, the firm’s sprawling operations in developing markets across the globe continue to pull up trees, a terrific precursor for long-term earnings growth.
The telecoms giant announced last month that service revenues leapt 4.7% across its Africa, Middle East and Asia Pacific (AMAP) region during April-June, and that it witnessed “good growth across most markets, driven by leading network quality, increasing demand for data and strong commercial execution.”
The company witnessed exceptional strength in Turkey, Ghana and Qatar, but its operations in India led the charge with a colossal 10.3% increase in service revenues. Although the impact of price increases has dented growth in recent times — turnover rose 11.9% during the previous quarter — the surging data demand helped propel revenues higher.
Vodafone has ploughed vast sums into emerging markets through its two-year, $19m Project Spring investment scheme, including the establishment of hundreds of new 3G sites in South Africa and India, as well as the huge roll-out of its M-Pesa money transfer facility in India, already a proven success in the growth hotbeds of Africa.
I believe that Vodafone’s huge bet on these regions should deliver excellent revenues growth in coming years, while vast capital expenditure in Europe — particularly in the German and Spanish ‘triple-play’ sectors — should also prompt a solid earnings turnaround.
Check out those dividend yields
Vodafone has long been a stock market favourite for those seeking above-average dividend yields. And although the City’s number crunchers expect enduring travails in Europe to decimate earnings in the medium term, the firm’s colossal cash pile is expected to underpin further solid dividend growth during this period.
Indeed, the mobile operator is expected to hike the dividend from 11p per share in the year concluding March 2014 to 11.4p during the current 12 months, and an additional rise — to 11.8p — is anticipated for next year.
These expected payments produce exceptional yields of 5.9% and 6.1% respectively, figures which are hard to match by almost all of the UK’s blue-chip firms — by comparison, the entire FTSE 100 currently sports a forward average of just 3.3%.