Being a Vodafone (LSE: VOD) investor must be tough going. Having more than halved in value over the last five years, the only thing that’s remotely attractive about this company, at least in my opinion, is its monster 11% yield. I’d much rather take my chances with another hated dividend stock.
Where’s the spark?
Q3 results out at the beginning of the week (5 February) did nothing to rouse my interest in the FTSE 100 juggernaut.
To be fair, I don’t think they were that bad. While continuing to struggle in some of its markets, notably Spain and Italy, it’s managing to grow revenue in others such as the UK and Turkey. Besides, we know that Vodafone is in the process of offloading its poorer-performing businesses.
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The problem is that I still can’t see a catalyst big enough for the share price to reverse direction, especially given the humungous amount of debt the company carries.
In the meantime, this year’s dividend looks unlikely to be covered by profit, which means the telecommunications giant may be forced to revise its distributions before long.
That’s hardly a signal for me to get involved and it looks like others feel the same. Tellingly, Vodafone doesn’t feature anywhere near the top of the best buy lists on various investment platforms.
Another 11%-er
Liontrust Asset Management (LSE: LIO) is arguably even more hated. Who wants to invest in a fund manager when general market sentiment for all but the biggest US stocks has been on the floor for so long?
Indeed, the firm’s latest trading update was far from encouraging. Net outflows rose to £1.7bn in the three months to the end of 2023 as investors ruminated over numerous macroeconomic and geopolitical headwinds. It was £1.6bn in the previous quarter.
What’s interesting, however, is that Liontrust shares offer roughly the same forecast yield as those of Vodafone.
So, why would I be more inclined to buy this stock?
Ready to roar
Well, Liontrust’s prospects should improve if and when we see the beginnings of the next bull market. With renewed confidence, investors should begin throwing money back at the very managers and funds they were once so keen to exit. This is assuming that they’re willing to overlook last year’s failed takeover of Swiss firm GAM Holding AG and the costs that came with it.
In the meantime, the monster yield is sufficient compensation for being patient. The mid-cap’s payout is at least expected to be covered by profit. Moreover, its balance sheet looks far more robust with a net cash position.
Sure, I need to be wary of making comparisons between two very different companies. And yes, Liontrust could still be forced to cut its payout if the market continues to stutter. So, spreading my cash around is still a must.
Value trap
Perhaps I’m wrong. Maybe Vodafone will multibag from here. Perhaps we have truly reached the point of maximum pessimism.
But I just can’t see it, at least based on the information and data I have before me. When a stock behaves like a dog for so long, maybe it’s just a dog.
If forced to choose between these two 11%-ers for passive income, I know where I’d be more comfortable storing my cash.
