Way back at the start of this century, Vodafone Group (LSE: VOD) was the biggest company in Europe, with its value briefly exceeding €200bn. However, its been pretty much downhill ever since for the Vodafone share price and its market valuation.
Vodafone’s vanishing value
Looking at the performance of this FTSE 100 stock over the past decade, it seems to be a graveyard for value investors. The shares have lost more than three-quarters of their value over 10 years and are down 55.7% over five years.
Even over one year, the picture looks pretty grim, with Vodafone shares dropping by 18.6%. As I write, they trade at 69.96p, valuing this telecoms giant at just £18.9bn.
Summing up, over the past 24 years, this group has plunged from #1 to #30 of the largest FTSE 100 firms. How the mighty have fallen.
I’m losing money on this laggard
My wife and I bought Vodafone shares 13 months ago, paying 90.2p a share in December 2022. At first, this trade looked profitable, with the share price peaking at 103.24p on 21 February 2023.
Alas, Vodafone stock proved to a value trap once again, as the share price plunged to a record low of 64.65p on 15 December. It has since risen by 8.2%. Still, if I were a billionaire telecoms tycoon, I’d gladly take over this Footsie firm at current price levels.
This stock is crazily cheap
Currently, these shares trade on a lowly multiple of 6.9 times earnings, generating an earnings yield of 14.5%. This comfortably beats the FTSE 100’s earnings yield of around 9%.
Furthermore, Vodafone shares offer the highest dividend yield in the Footsie. At 11.1%, I get one-ninth of my holding’s value returned to me in cash each year. Reinvesting this cash into more shares would double my money in under seven years (assuming the share price goes nowhere).
Then again, history has taught me that double-digit cash yields rarely last. Either dividends get cut and shares plunge, or share prices eventually rerate upwards.
One problem for Vodafone’s ultra-high yield is that it’s covered only 1.3 times by historic earnings. This is too low for my liking. Hence, I suspect CEO Margherita Della Valle — appointed in December 2022 — may preserve cash by lowering it into single-digit territory.
What next for 2024?
They say forecasting is for fools, but as a Motley Fool, I’m going to give it my best shot. Here are three predictions I’ll make for this year.
First, I don’t see the Vodafone share price reaching its 2023 high of 103.24p in 2024. It might not even scrape the £1 mark. But good news on the ongoing strategic turnaround might boost the price to, say, 90p. That’s up 28.6% from here.
Second, the next dividend of 4.5 US cents a share will be paid on 2 February. While this payment is in the bag, I worry the next dividend could fall below 4.5¢.
Third, Della Valle will continue to offload assets in order to reduce net debt of €33.4bn. And just how much she gets from these disposals could be a big influence on the Vodafone share price in 2024!
