It’s been an eventful year for shareholders in Vodafone (LSE: VOD) (NASDAQ: VOD.US), with the telecoms company disposing of what many investors saw as its ‘crown jewel’. Indeed, the sale of its stake in Verizon Wireless at the back end of 2013/start of 2014 was met with surprise by many market participants, with many of them wondering how on earth Vodafone could go about replacing its most profitable, most reliable and most lucrative division.
However, Vodafone has since embarked on what appears to be a sound strategy and, in the long run, it could help to pay off your mortgage. Here’s how.
Buying On The Cheap
With Vodafone having a significant exposure to Europe, many investors thought the company would seek to diversify its operations so it was less reliant upon one geographical region. However, Vodafone has sensed a rare opportunity to buy high-quality assets at a significant discount to their intrinsic value. Clearly, Europe is highly unlikely to experience anaemic levels of growth over the long term, so Vodafone is banking on playing a patient game through purchasing assets such as Kabel Deutschland and Spain’s Ono.
Of course, such a strategy is unlikely to yield a quick return. This, though, is not Vodafone’s aim. The company appears to be extremely patient and is happy to bank on a long-term European recovery; utilising its relatively low leverage to maximise returns to shareholders. The strategy, although not for the faint-hearted, should pay-off once the macroeconomic outlook improves for Europe.
A Top Yield
In the meantime, Vodafone is rewarding its investors’ patience with a great yield. Indeed, shares in Vodafone currently yield 5.9%, which is above and beyond the FTSE 100’s yield of around 3.4%. While dividend per share growth is anticipated over the short to medium term, a rather stagnant bottom-line could mean that shareholder payouts are also limited in terms of their growth prospects. A 5.9% yield, though, should prove attractive for a good while yet.
Looking Ahead
Clearly, Vodafone is a stock for patient, long term investors. The company appears to be doing all the right things to firm up its exposure to Europe and to take advantage of a weak economy and low financial gearing levels. As such, it could prove to be a great long term play, with a top-notch yield helping investors to make it through the interim period. As a result, Vodafone could make a positive contribution to your mortgage repayments.
