Down 23% in a year, are Vodafone shares a busted flush?

Vodafone shares have lost almost a quarter of their value in 12 months, while more than halving over five years. But I’m a firm holder of this stock.

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The past five years and more have been a rough ride for owners of Vodafone Group (LSE: VOD) shares. Since early 2018, the Vodafone share price has plunged by roughly two-thirds, wiping out tens of billions of pounds of shareholder wealth.

Shares’ long slide

At the end of 2018, the stock closed at 235p, with the shares nowhere near that level ever since. Here’s how the telecom giant’s share price has performed each year since 2018:

Year-endShare priceYearly change

For the last five years in a row, this FTSE 100 stock has lost value for its owners. Falls nearing 35% in 2018, 18% in 2020 and 25% in 2022 have battered the share price from triple to double digits.

Over one year, the widely held stock has lost 23.3% of its value, while it has crashed by more than half over five years. At the current share price of 78.14p, the group is valued at just £21.2bn. That’s a far cry from 2000, when Vodafone was Europe’s most valuable listed company.

What went wrong?

On occasion, I’ve heard the European telecoms market described as ‘a graveyard for yield investors’. And this certainly seems to be the case for Vodafone.

Don’t get me wrong — the group is still a huge global enterprise today. Vodafone is Europe’s largest operator of mobile and fixed networks. It also has the continent’s biggest and fastest-growing 5G network. In total, it has 300m mobile customers, 27m fixed broadband customers and 22m TV customers.

Despite this huge size and scale, it has found it very difficult to consistently grow its revenues, earnings and cash flow. In addition, its balance sheet is weighed down by €33.4bn of net debt, though this has fallen by almost a fifth (-19.7%) from €41.6bn a year prior.

I own this stock

For my sins, I am a part-owner of Vodafone. My wife bought the stock for our family portfolio in December 2022, paying 89.4p per share.

Today, we’re nursing a paper loss of 12.6%, which is hardly ideal. Then again, the shares have bounced back by 12.1% from their 52-week low of 69.73p, hit on 11 July.

Furthermore, I’m hopeful that there may be light at the end of the tunnel for long-suffering shareholders. CEO Margherita Della Valle could become a new broom that sweeps away some of the group’s legacy problems. She’s already brokering new strategic partnerships with other big players.

Also, all the above returns exclude cash dividends, which are the primary reason why we invested in Vodafone. The stock’s cash yield of 10% a year is one of the highest in the London market. It’s also 2.5 times the yearly cash yield of the wider FTSE 100 (4%).

In other words, Vodafone is — for me, at least — a dividend play with recovery upside. So while I wait for the new CEO to turn things around, I will happily collect my 10% a year in cash. Unless future dividend payouts are cut, of course!

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Cliff D’Arcy has an economic interest in Vodafone Group shares. The Motley Fool UK has recommended Vodafone Group. 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.

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