Global stock markets have started strongly in 2024, but not the FTSE 100 and many of its constituents. The Footsie is up 2.3% since 29 December, versus 9.1% for the S&P 500. But as has happened all too often, the Vodafone Group (LSE: VOD) share price is weak.
Volatile Vodafone
At its peak in 2000, Vodafone was Europe’s largest company by valuation. But when the dotcom bubble burst that year, the telecoms group’s worth plunged.
Vodafone’s downward descent continued for the last 10 years, sending the share price far below the 250p mark it exceeded in late 2014. Frankly, this stock has been a deadly destroyer of shareholder value for too long.
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On Friday (5 April), the shares closed at 68.58p, valuing the firm at £18.6bn. This is 9.6% above the 52-week low of 62.59p, hit on 12 February. Alas, it’s also 29.3% below the 52-week high of 97.05p, briefly touched 11 months ago on 3 May 2023.
Here’s how this widely held stock has performed over various timescales:
| One week | -2.7% | One year | -23.3% |
|---|---|---|---|
| One month | -2.4% | Two years | -45.4% |
| Three months | -2.6% | Three years | -48.7% |
| Six months | -9.9% | Five years | -51.5% |
One thing my table clearly shows is this stock’s relentlessly negative momentum. Over all eight periods ranging from one week to five years, the Vodafone share price has lost value. It’s down almost a quarter over 12 months and has more than halved over the last half-decade.
Dividend drops
These sustained falls in the share price have boosted Vodafone’s dividend yield into double digits. The trailing dividend yield is a whopping 11.2% a year — over triple the FTSE 100’s yearly cash yield of 4%.
However, such high cash yields rarely last. Indeed, Vodafone’s board duly halved this payout from 2025, reducing it to 5.6% a year. But when this announcement came, the shares rose, presumably because this move cuts the debt-laden group’s cash outflows by roughly £1bn a year.
For the record, my wife and I own Vodafone stock, paying 90.2p a share in December 2022 for our stake. To date, we’re sitting on a capital loss of 24%, which is offset by €0.09 (7.7p) in dividends received.
When’s the comeback?
We bought these shares largely for their passive income, but also as a value bet. While the first part worked well in 2023-24, the second part has gone awry. But I’m hopeful that the stock can bounce back in 2024-25.
One positive note is that the group is selling its Italian business to Swisscom for €8bn, with €4bn of this set to be returned to shareholders in the form of share buybacks.
This deal is expected to close in the first quarter of 2025. For me, buying back 21.5% of its stock could boost Vodafone shares significantly over the next 12 to 18 months. Perhaps they might even hit £1 again?
Then again, Vodafone’s master plan to merge its UK operations with those of CK Hutchison-owned Three recently hit a hurdle. The UK’s Competition and Markets Authority (CMA) is investigating this £15bn tie-up on consumer-competition concerns.
In summary, if Vodafone can deliver on all fronts, then I’m hopeful of an eventual return to a £1 share price. But I won’t hold my breath!
