The Vodafone (LSE: VOD) share price has gained 25% so far in 2025. But it’s still down more than 20% over the past five years overall. Forecasts are mixed, with an average price target of 86p — less than a penny ahead of where we are now.
Two things make me think the naysayers might be missing something good. I’m talking about the stock’s current valuation, and what I see as solid dividend prospects.
A mixed dividend story
For years, Vodafone paid dividends that just weren’t sustainable. And that’s why I, as mainly a dividend investor, never bought. And when the inevitable 50% cut came in the 2024-25 year, I think it split investors.
It definitely made Vodafone more attractive to me, and I expect to investors with a similar view. We suddenly saw something more sustainable, and a positive outlook for progressive long-term dividends.
With full-year results released in May, the company affirmed the rebased dividend level at 4.5 eurocents per share. On top of that, Vodafone confirmed it had completed its €2bn share buyback in the year. And it announced a new one of the same amount.
That should help boost future per-share payments, and back up the board’s plan to get back to progressive dividends. It’s all good news to me, and the analysts agree. They expect the Vodafone dividend to grow 11% between 2025 and 2028.
Undervalued shares?
At the time of writing, Vodafone shares trade at 85.3p. And I reckon I see a mismatch there between the price and the potential long-term value. That happens a lot on the stock market, and spotting it can help us boost our returns — if we get it right.
The forecast price-to-earnings (P/E) ratio stands at 12.3 now, dropping to 11.2 by 2028. That reflects perhaps modest growth. But it marks a big change since Vodafone posted an operating loss in 2025. And it’s low by FTSE 100 standards, if perhaps not screaming cheap.
Vodafone has a relatively low price-to-sales ratio (PSR) too, at about 0.7. PSR values in the sector tend to be low, but that’s near the bottom end.
We’re also looking at a forward price-to-book value ratio (PBR) of only 0.4. What a company like this does with its assets is far more important than how the share price relates to the value of those assets. But again, this is at the low and of a relatively low PBR sector.
Not plain sailing
Vodafone does still face hurdles, one of which is its struggling German operation. With a Q1 update in July though, CEO Margherita Della Valle told us: “Germany has started its improvement trajectory and our emerging markets are delivering strong broad-based growth.“
The merger with Three has created uncertainty too. It’s complete now, but it will bear close watching over the rest of the year.
For me, net debt — still as high as €22.4bn at 31 March — is definitely a worry. And even though it fell in 2025, it’s expected to creep up again.
Still, I do think Vodafone shares look undervalued. And long-term dividend investors could do well to consider buying.
