The Vodafone (LSE: VOD) dividend forecast might be one for investors to keep an eye on.
After all, Vodafone shares just fell to a 10-year low. The lowest share price for a decade means the usually reliable dividend has been pushed up to a 12% yield.
I don’t own any of the shares, but I must say I’m tempted by what’s now the largest yield across the FTSE 100. Can I expect these big payouts to continue?
No guidance
The first thing to point out here is the 2023 interim dividend has just been paid, and Vodafone has not yet released guidance as to future dividends.
Full-year results are coming on 14 May. This will be a date to put in the calendar. Management will be expected to reveal its expectations on how well cash flows will cover shareholder payouts.
The firm has said it is “aiming for 9 cents” as a dividend, the same as the last four years, but whether the firm achieves this or not is very much up in the air.
Vodafone has sizeable debt and an urgent need for capital expenditure – the 5G rollout for example – to keep up with competition. Recent results suggest revenue is slowing too.
Forecast earnings
In the absence of no guidance from the company itself, we’ll have to look towards analysts to predict the next few years. The LSEG analysts’ consensus for earnings-per-share (EPS), dividend-per-share (DPS) and cash-flow-per-share (CFPS) is below.
Note: Vodafone is currently in fiscal year 2024 and May this year will be the start of fiscal year 2025.
| 21 | 22 | 23 | 24 | 25 | 26 | |
| DPS (€) | 0.09 | 0.09 | 0.09 | 0.08 | 0.07 | 0.07 |
| EPS (€) | 0.08 | 0.11 | 0.11 | 0.07 | 0.09 | 0.10 |
| CFPS (€) | 0.58 | 0.62 | 0.65 | 0.39 | 0.37 | 0.38 |
As the table suggests, Vodafone will struggle with cash flow and earnings. The forecast 40% drop in EPS in 2024 will make affording current dividends tricky.
Vodafone may not want to cut payments quickly though. The firm has a reliable record of increasing dividends since 2008 and even during the pandemic chose to reduce the dividend rather than cancelling it altogether like many other companies.
On the DPS figures, we can expect a forecast yield of 8.96% for 2025 and also 8.96% for 2026. So I’m looking at a fair drop from current levels but still some of the best yields I might get the world over.
I’ll mention that I’m calculating these from a 67p share price. The share price has been erratic recently so this may change very quickly. On 14 February it rose around 5% in just a day.
My move
Such volatility is another sign of trouble. While those forecast yields look attractive, the uncertainty around the firm means any forecasts are harder to rely on. I wouldn’t be shocked if the May results bring Vodafone shareholders a nasty surprise.
For these reasons, I won’t be buying the shares myself.
