Earlier today, the FTSE 100 index hit an all-time high of 8,103.92 points before easing back. Suddenly, the Footsie feels back in fashion, with a major takeover bid also announced today. However, not all shares have enjoyed this rising tide, including the Vodafone Group (LSE: VOD) share price.
Vodafone is volatile
Looking at Vodafone’s one-year share chart, one can see its trajectory is heading south, but with a fair amount of zig-zagging along the way.
At its 52-week high, the Vodafone share price peaked at 97.05p on 3 May 2023, but it’s been pretty much all downhill since. On 12 February, the stock bottomed out at 62.59p, before rebounding.
As I write on 25 April, the shares trade at 70p, valuing this multinational telecoms group at £19bn. This is a far cry from its valuation at the turn of the century, when it was Europe’s largest listed company before the dotcom bubble burst.
Here’s how the shares have performed over six timescales:
| Five days | +4.6% |
| One month | +1.7% |
| Six months | -5.9% |
| YTD 2024 | +1.8% |
| One year | -23.8% |
| Five years | -51.0% |
Looking at my table, I see a share drifting and lacking short-term momentum. Also, Vodafone shares have been a lemon in the long term, losing almost a quarter of their value over one year and more than halving over five.
Vodafone’s hidden value?
For the record, my wife and I own these shares, having paid 90.2p a share for our stake in December 2022. To date, we are nursing a paper loss of 22.4%, which I’m not thrilled about.
The thing that drove me to buy into this group was its dividend. At the current share price, Vodafone stock offers a cash yield of 11% a year. This is almost triple the wider FTSE 100’s dividend yield of under 4% a year.
Now for the bad news: in order to preserve cash and strengthen its balance sheet, the group’s board has decided to halve its yearly dividend from $0.09 to $0.045 next year. This will save roughly £1bn a year in cash payouts — a saving it perhaps might use to trim its net debt of €36.2bn?
Despite the halving of future dividends, the Vodafone share price has held up recently. That’s because the company is selling its Italian arm to Swisscom for €8bn, earmarking half of this sum for share buybacks.
Could the shares hit £1?
Buying back €4bn of its shares would reduce the size of Vodafone’s share base by around 18%. All else being equal, this would boost future earnings per share by 22%.
Also, I’m hopeful that the group’s plan to merge its UK operations with those of CK Hutchison-owned Three gets approval from the UK’s Competition and Markets Authority. If this £15bn-merger does go through, then it might boost the shares.
However, as I said earlier, Vodafone has been a long-term loser for shareholders. It has struggled to grow its revenues, profits, and cash flows over the years, while its net debt is a major burden.
That said, if CEO Margherita Della Valle can successfully execute her turnaround plan, then the Vodafone share price might clear £1 again. But I won’t be holding my breath until then!
