Here’s why the Vodafone share price could be a big FTSE 100 winner in 2024

What’s the best thing about the Vodafone share price being down so low? When pessimism is at its worst, it could be time to consider buying.

| More on:
Affectionate Asian senior mother and daughter using smartphone together at home, smiling joyfully

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

The Vodafone (LSE: VOD) share price has been one of the growth winners of the past few years… oh, hang on, I’ve got the chart the wrong way up!

Vodafone shares have actually lost more than 50% of their value in the past five years. They bottomed out in February at 52-week low of under 63p.

At 66p as I write, the price hasn’t regained a lot. But I can’t help thinking the second half of 2024 might bring a change.

Dividend slashed

The dividend has surely been a key part of Vodafone’s downfall, simply because it was unaffordable. When a company isn’t making the profit to pay it, shelling out for a dividend yield of 10% or more just has to be madness. I mean, isn’t that part of introductory economics?

It really didn’t serve shareholders well, with the cash looking like scant compensation for their dwindling share price.

But it’s all set to change. The board will still pay the full dividend this year, for a yield of 11.4% on the current share price.

But for 2025, it will slash it in half.

Restructure

It’s all part of CEO Margherita Della Valle’s plan to reshape the telecoms giant. The new way is to “be operating in growing telco markets.” And the firm has dumped businesses in Italy and Spain to help with that.

The disposals raised a nice chunk of cash, which should help fund the future. And there was enough for a share buyback as a sweetener.

But, while I applaud these plans, there are still some huge uncertainties hovering over Vodafone.

Still, looking at this upheaval, my take on Vodafone stock has cautiously changed from ‘wouldn’t even touch it with someone else’s bargepole’ to ‘this might actually be a buy now for both growth and income’.

Forecasts

Broker forecasts are up in the air a bit, and will surely be refined in the coming months.

But with decent earnings growth on the cards, we could see the price-to-earnings (P/E) ratio down as low as nine by 2026. And that’s with what would still be a good dividend yield.

There’s no guarantee that all of this will come good, though. And a fundamental change in a FTSE 100 company can be expensive and can take a long time.

I’m reminded of Aviva, which has also gone through a big refocus. It’s coming good now, but it took a few years for the evidence to show through and get investors back on board.

Wheels

So there’s a long way to go, and the wheels could still come off. And I know that for some of my colleagues at The Motley Fool, Vodafone is still firmly in bargepole territory.

Oh, and to add to the challenges, there’s still a sizeable pile of debt to deal with.

But I can’t help feeling that the risk might already be in the share price, and that we could see some strong gains by the end of the year.

FY results due on 14 May will be a must-read for me.

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.

Alan Oscroft has positions in Aviva Plc. The Motley Fool UK has recommended Vodafone Group Public. 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

Investing Articles

If I’d invested £1,000 in Tesla stock a decade ago, here’s what I’d have now!

While many of us debate whether Tesla stock is worth the price today, it's undeniable that the EV share has…

Read more »

Investing Articles

Here’s what Michael Burry did as the BP share price dipped!

The BP share price has fallen from its peaks once again, and infamous investor Michael Burry may have spotted an…

Read more »

Young mixed-race woman jumping for joy in a park with confetti falling around her
Investing Articles

What on earth’s going on with the Barclays share price?

The Barclays share price has skyrocketed in recent months, becoming one of the best-performing stocks on the FTSE 100 since…

Read more »

Man writing 'now' having crossed out 'later', 'tomorrow' and 'next week'
Investing Articles

Analysts say this amazing FTSE 100 stock is a takeover target!

This FTSE 100 stock's one of the worst-performing companies on the index in 2024. So why might other companies want…

Read more »

happy senior couple using a laptop in their living room to look at their financial budgets
Investing Articles

5.4% yield! 2 UK dividend shares to consider for a £1,080 passive income

I think these UK shares could provide a large and sustainable passive income. And they could be great buys today…

Read more »

Investing Articles

Here’s how investing £250 a month could bag me over £10K in passive income annually

This Fool breaks down how she would go about building a passive income stream worth over £10,000 annually to enjoy…

Read more »

Young black colleagues high-fiving each other at work
Investing Articles

I’d snap this FTSE 250 stock up in a heartbeat for juicy returns and growth!

Sumayya Mansoor explains why this FTSE 250 property stock is firmly on her radar as she looks to buy stocks…

Read more »

Man writing 'now' having crossed out 'later', 'tomorrow' and 'next week'
Investing Articles

1 dirt-cheap FTSE 100 stock investors should consider buying in June

The FTSE 100 is littered with bargains, according to our writer. She explains why investors should be taking a closer…

Read more »