Vodafone (LSE: VOD) (NASDAQ: VOD.US) was the first stock I ever bought, and it has paid me back in kind, thanks to its healthy dividend yield of around 5%.
Recent months have seen its share price rise, and fall back, and resurrect again on speculation that it would be willing to sell its 45% stake in Verizon Wireless to its partner in the joint-venture, Verizon Communications.
The American telecoms company, which has not been shy in publicly declaring its interest in taking full control of Verizon Wireless, has finally got its wish, and Vodafone has confirmed they have agreed a $130bn deal, funded by a mixture of Verizon stock and cash.
But where does this leave me as a Vodafone shareholder? Well, one of my initial reasons for buying was the Verizon Wireless asset, which has injected money into Vodafone’s coffers for the last few years, including occasional special dividends that increased the yield to about 7.5%.
Sell?
Without the Verizon Wireless asset, some believe the group would be too dependent on revenues from Europe, which have suffered amid this turbulent economic period.
With my shares having seen a return of more than 21% since I bought them, a case could be made to sell while the price is high and bank the profit.
Hold?
However, Vodafone’s management has not been complacent, and while it has been making Verizon’s board sweat before entering into formal discussions, the company has been making acquisitions, including Kabel Deutschland for £6.6bn .
This deal gives Vodafone entry into one of Europe’s better-positioned countries as a ‘leading integrated communications operator’, and is a clear example of chief exec Vittorio Colao’s vision of a one-stop shop for the company, encompassing mobile, broadband and television.
Buy?
What’s more, management has indicated that £54bn from the Verizon Wireless sale will be returned to shareholders.
While this will be a one-off payment, I’m still more than content with Vodafone’s current yield, which remains one of the best in the FTSE 100, and if the company is able to reinvest the Verizon proceeds wisely then the shares could even turn out to be undervalued currently.
Verdict
In my relatively short time in the stock market, I have learnt quite a few investing lessons from fellow Fools, arguably the most important one being don’t trade just on the sentiment of the market, but instead study for the company ‘beneath’ the shares.
For that reason, I’m happy to hold my stake in Vodafone and await further developments concerning how the company will proceed after selling Verizon Wireless.
Until then, I’d rather use my ‘dry powder’ to buy shares in this company, touted by our analysts as “The Motley Fool’s Top Growth Stock Today”.
As a relatively young investor, I’m splitting my portfolio between income and growth shares. With Vodafone contributing towards the former, I’m very much intrigued by the future prospects of the highlighted share.
If you set up your portfolio in a similar fashion then why not check out the report, too? It’s completely free and will be sent to you in seconds – simply click here now!
> Sam owns shares in Vodafone. The Motley Fool has recommended shares in Vodafone.
