Forget buy-to-let! The Vodafone share price is where I’d invest today

Vodafone Group plc (LON: VOD) could offer a stronger income outlook compared to buy-to-let.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Young woman sat at laptop by a window

Image source: Getty Images.

While buy-to-lets have proven popular among investors in the past, there are a number of FTSE 350 shares which could offer stronger total return outlooks. Vodafone (LSE: VOD), for example, seems to be trading on a low valuation following its share price fall. It has a dividend yield which is almost twice that of the FTSE 100, which suggests that its income potential is high.

At the same time, the prospect of rising interest rates and an uncertain future for the UK economy could mean that the buy-to-let sector becomes less appealing. As such, buying Vodafone, and another dividend share which reported an upbeat update on Tuesday, could be a shrewd move, in my opinion.

5 Stocks For Trying To Build Wealth After 50

One notable billionaire made 99% of his current wealth after his 50th birthday. And here at The Motley Fool, we believe it is NEVER too late to start trying to build your fortune in the stock market. Our expert Motley Fool analyst team have shortlisted 5 companies that they believe could be a great fit for investors aged 50+ trying to build long-term, diversified portfolios.

Click here to claim your free copy now!

Dividend growth potential

The company in question is information technology global professional services provider FDM Group (LSE: FDM). Its trading update for the year to 31 December showed continued strong operational performance, delivering results in line with expectations.

Revenue for the year increased by 5% to £245m, while market demand in all of its operating territories remained strong. It’s also experienced record levels of client engagement and demand and is optimistic for further growth in the current year.

Net profit growth in the 2019 financial year is expected to be 9%. This is due to catalyse the company’s dividend so it has a yield of 4%. If forecasts are met, its dividend payout will have increased at an annualised rate of 36% over the last five years, which suggests that it’s becoming an increasingly appealing income opportunity. As such, FDM Group could deliver improved stock price performance after its decline of 13% in the last year.

Recovery prospects

Also posting a disappointing share price performance over the last year has been Vodafone. The company’s shares are down by over a third during that time, underperforming the FTSE 100 by 23%.

Debt concerns seem to be the main cause of its share price fall. The €19bn acquisition of Liberty Global’s cable networks is expected to lead to further pressure on what is an already highly-indebted balance sheet. And while its management team recently allayed concerns over a dividend cut in the near term, it remains a possibility over the next few years.

Even with a dividend cut, though, Vodafone is likely to continue to offer a higher yield than the wider index. It currently yields 8.8%, versus 4.5% for the FTSE 100. It’s also putting in place an aggressive cost-cutting programme which may help to make the business more flexible and efficient.

Although there are risks facing the company and the world economy, it offers diversity and the potential to obtain a high yield. For long-term investors, therefore, it could offer investment potential from both a value and income perspective. As ever, buying potentially undervalued shares is never without risk. But the rewards that are on offer could make it a much stronger opportunity than a buy-to-let.

Is this little-known company the next ‘Monster’ IPO?

Right now, this ‘screaming BUY’ stock is trading at a steep discount from its IPO price, but it looks like the sky is the limit in the years ahead.

Because this North American company is the clear leader in its field which is estimated to be worth US$261 BILLION by 2025.

The Motley Fool UK analyst team has just published a comprehensive report that shows you exactly why we believe it has so much upside potential.

But I warn you, you’ll need to act quickly, given how fast this ‘Monster IPO’ is already moving.

Click here to see how you can get a copy of this report for yourself today

Peter Stephens owns shares of Vodafone. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

A Rolls-Royce employee works on an engine
Investing Articles

In penny stock territory, is the Rolls-Royce share price set to soar?

The Rolls-Royce share price has sunk recently, falling into penny stock territory. But with flying hours recovering, is it too…

Read more »

Hand of person putting wood cube block with word VALUE on wooden table
Investing Articles

Lloyds shares drop 20% in 4 months. Should I buy now?

Lloyds shares have lost a fifth of their value since peaking on 17 January this year. But after rebounding from…

Read more »

Warren Buffett at a Berkshire Hathaway AGM
Investing Articles

As the stock market recovery stalls, should I wait to buy?

Has the stock market recovery run out of steam? If so, what does that mean for our writer's portfolio? Here…

Read more »

Diagonal chain made of zeros and ones. Cryptocurrency and mining.
Investing Articles

At 55p, is the Argo Blockchain (LON:ARB) share price too cheap to miss?

With a low P/E ratio and strong financial results, could the Bitcoin miner be good value for money?

Read more »

macro shot of computer monitor with FTSE 100 stock market data in trading application
Investing Articles

Here are 2 recession-proof FTSE stocks!

In the face of current economic uncertainty and fears of a looming recession, this Fool identifies two recession-proof FTSE stocks.

Read more »

British Pennies on a Pound Note
Investing Articles

Here is 1 penny stock primed to benefit from the construction boom!

Jabran Khan delves deeper into a penny stock that he believes could benefit from the construction boom, and explains why…

Read more »

Various denominations of notes in a pile
Investing Articles

Here is 1 top passive income stock to buy and hold!

Jabran Khan wants to boost his passive income stream through dividends and has identified this insurance giant as a way…

Read more »

Cheerful young businesspeople with laptop working in office
Investing Articles

These are the 5 worst ways to invest in stocks

It's all too easy to lose money when you don't really know how to invest in stocks. Here are the…

Read more »