I’m always keeping an eye on the Vodafone (LSE: VOD) share price. But even with it now below 70p, I have zero plans of picking up shares in the telecommunications giant any time soon.
Quite frankly, the stock has been a terrible performer in the last five years. Across that period, it has lost 51.8% of its value. Even in 2024, when the FTSE 100 has rallied 5.2%, Vodafone has fallen by 3.2%. Today, a share costs just 67.5p.
For shareholders, recent years will no doubt have been frustrating. At the turn of the century, Vodafone was Europe’s largest company by valuation. Today, it doesn’t rank inside the top 30 companies on the Footsie by market cap.
I can see the attraction
To be fair, I can see why some investors deem its price attractive right now.
The business has been in the doldrums lately but with CEO Margherita Della Valle at the helm, things could be changing.
She’s made an effort to streamline the group’s operations as Vodafone continues its restructuring process. It has disposed of its operations in Spain for €5bn. It has also entered an agreement to offload its Italian business for €8bn.
That means a much-needed cash injection. The business intends to use these funds to reduce its debt. It will also return €4bn to investors through a share buyback scheme.
Too many red flags
But while that’s all well and good, there are a few issues for me that are severely off-putting.
The first is its debt. While it’s working on reducing it, the pile is still massive. As of September 2023, this was €36.2bn. What’s more, with interest rates at their current levels, this will only make it more difficult to pay off.
Secondly, I like to seek income from my investments. Therefore, while it’s easy to get initially drawn in by its monumental 11.4% dividend yield, it’s worth remembering that it will be slashed in half in 2025.
I don’t knock Vodafone for making that decision. For years the sustainability of its index-leading yield has been questioned. As it continues to streamline, reducing its payout makes sense. It’s set to free up €1bn a year for the firm.
But for me, with a reduced yield, the stock loses its shine. Its new 5.7% yield is nothing to scoff at. But I think I can find better out there.
One I’ll be avoiding
I’m not doubting that the Vodafone share price has potential. I could look back on this come the end of the year and be eating my words. But there’s not enough for me to like about the stock to consider buying it today.
Its restructuring process could prove to be successful, but it also comes with risk. And as an investor, it’s a risk that I’m not comfortable taking on right now.
An array of Footsie companies look like great investment opportunities at the moment. I think investors should consider looking elsewhere before Vodafone.
