£10,000 invested in Vodafone shares 5 years ago is now worth…

It may be one of the UK’s biggest companies but Vodafone shares have been on a downward trajectory for many years. Paul Summers surveys the damage.

| More on:

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.

While holders of some FTSE 100 stocks have enjoyed wonderful returns over the last five years, the same can’t be said for those invested in telecommunications giant Vodafone (LSE: VOD).

Even a one-time-owner like me is staggered to see how far it’s fallen.

Woeful performance

Let’s cut to the chase: a £10,000 stake made five years ago would now be down 57% in value. Put another way, it would be worth around £4,300. In sharp contrast, the index is up 15% as a whole.

Since loyal investors have received dividends over this period, this isn’t quite the end of the matter. In fact, the company’s dividend yield has long been far higher than the average across the FTSE 100. This means the return hasn’t been quite as bad as that headline percentage.

It’s still pretty awful, though. Moreover, the £17bn cap’s aforementioned yield is mostly the result of its share price continuing to fall rather than a sign of it being a passive income powerhouse. More on dividends in a bit.

Bargain stock?

Of course, this terrible run of form does lead to another question: when might Vodafone be considered a bargain for risk-tolerant Fools? Well, this is where things get interesting.

It’s clear that CEO Margherita Della Valle has made progress in her attempts to streamline the business. Operations in Spain and Italy have been sold. A merger with Three in the UK also received the green light from the Competition and Markets Authority (CMA) in December 2024.

Yesterday’s (4 February) trading update was hardly a disaster either. Group total revenue rose 5% to €9.8bn. Organic service revenue also improved in every one of the company’s main markets with the exception of Germany (down 6.4%). Full-year guidance was maintained too.

Looking ahead, Vodafone’s growing presence in Africa could prove a boon to investors. Should this be the case, the current valuation of 10 times FY25 earnings might prove cheap in time.

But there are still reasons to be wary, at least in my view.

Heavy burden

Vodafone’s debt pile has long been one of the biggest thorns in its side. And while this burden has fallen in the post-pandemic years, it remains substantial. It’s hard to see a quick solution, especially given the high ongoing costs of keeping infrastructure maintained. And this is before we’ve even considered the impact of external economic headwinds. The FTSE 100 might be setting record highs but Vodafone stills looks very fragile.

The company’s higher-than-average dividends also needs to be put in context. Back in 2019, the total payout was 9.24 euro cents per share. The distribution for FY25 (ending 31 March) is estimated to be just 5.3 euro cents per share. So, not only have holders seen the value of their stakes fall by more than half, they’ve been receiving less income to boot.

Perhaps the forthcoming merger with Three UK will mark a line in the sand. Perhaps we may see an incredible recovery in the stock, not dissimilar to those of other top-tier winners like Rolls-Royce and British Airways-owner International Consolidated Airlines.

But a lot surely needs to go right before the market is willing to change its opinion on the company.

With this in mind, I think there are far better value stocks to consider than this one.

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.

Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has recommended Rolls-Royce Plc and 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

Young Caucasian woman with pink her studying from her laptop screen
Investing Articles

Time to buy Nvidia shares before fresh all-time highs?

Nvidia shares began 2025 at an all-time high before a big drop in the last week or two. Our writer…

Read more »

Investing Articles

A top FTSE 100 share to consider for a Stocks and Shares ISA starter portfolio!

While not without risk, a lump sum in this FTSE 100 trust could prove a great way for Stocks and…

Read more »

Runner standing at the starting point with 2025 year for starting in new year 2025 to achieve business planing and success concept.
Investing Articles

I asked ChatGPT to name the best 5 UK shares to build wealth over 50 – and here they are!

Harvey Jones is looking to build a balanced portfolio of UK shares to fund his final years, and asked ChatGPT…

Read more »

Investing Articles

£10k invested in Scottish Mortgage shares after the DeepSeek crash is now worth…

Harvey Jones thought his Scottish Mortgage shares were heading for a bumpy ride when DeepSeek emerged last month. Then he…

Read more »

Middle-aged white man wearing glasses, staring into space over the top of his laptop in a coffee shop
Investing Articles

1 ex-penny stock up nearly 400% in my Stocks and Shares ISA! 

This writer is starting to take notice of a small-cap stock that is 'up' significantly in his ISA portfolio over…

Read more »

Investing Articles

The FTSE 100 index hits new highs! But will Legal & General shares outperform it in 2025?

Legal & General's share price has rocketed almost 8% so far in 2025. Can it continue to outstrip the surging…

Read more »

Investing Articles

Up another 8% in a week! So what’s stopping me from buying IAG shares? 

Harvey Jones is desperate to add high-flying IAG shares to his portfolio before they climb even higher but there's a…

Read more »

Happy couple showing relief at news
Investing Articles

The Bank of England’s slashed its growth forecast but the FTSE 100 doesn’t seem to care!

On the day the UK’s central bank halved its forecast for growth in 2025, the FTSE 100 reached a record…

Read more »