In this Ask A Foolish Question article, I’ll attempt to help novice investors understand the implications of the Vodafone (LSE: VOD) (NASDAQ: VOD.US) deal that saw it sell its 45% stake in Verizon Wireless to co-owner Verizon Communications (NYSE: VZ.US).
First, an overview of how the $130bn deal breaks down:
- £38bn cash;
- £38.9bn Verizon shares;
- £3.2bn loan notes (to mature over the next eight to 11 years);
- £1.6bn in liabilities that Verizon is set to assume;
- while Vodafone will receive a 23% stake in Vodafone Italy.
So, as a shareholder, it’s obvious that it won’t be a straightforward special dividend paid in cash that I’ll be receiving — it will include shares in Verizon, too.
Now, I am yet to hold an American share in my stocks-and-shares ISA, so this will be a first for me — should I take up Vodafone’s option of a ‘B’ share scheme.
This will grant shareholders the choice to receive Verizon shares and money, or just collect the cash. Many Fools have pointed out that they don’t want to have to learn US law and accounting standards in order to properly understand their Verizon shareholding, and are opting out.
However, others have stated their belief that Verizon Wireless was throwing off cash to its owners before, and will continue to do so in the future, which puts forward a strong case to hang on to those Verizon shares and reap the rewards.
Bear in mind, though, that unless you hold your shares in an ISA like me, those dividends will get taxed either by income or capital gains tax — something else to consider.
Elsewhere, some Fools are saying because of the 112p returned to shareholders next year, the price of Vodafone will go down by the same amount, and they’re looking to sell while the going is good now.
Yet another twist in the tale comes from those who believe that, if Vodafone can’t easily invest the remnants of the cash from selling the Verizon Wireless asset, it may be set for a takeover bid by a big-name player such as AT&T, and shareholders would stand to benefit from the inflated price any buyer would likely have to pay.
The last few points especially, it’s all speculation right now. But having learnt my investing trade at the Motley Fool’s knee, I know to resist any impulses to buy or sell on a few whispers, as I subscribe to a three- to five-year plan when buying shares — and I suggest you do, too.
With that in mind, it’s a great feeling to regularly see dividends arrive in my share-dealing account — and for five of the best shares that deliver, I struggle to look past the ones outlined in the special free report, “5 Shares To Retire On“.
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> Sam owns shares in Vodafone. The Motley Fool has recommended shares in Vodafone.
