Shares in Vodafone Group (LSE: VOD) (NASDAQ: VOD.US) have had an erratic decade, being boosted in recent years by the Verizon Wireless sale and by rumours of takeovers. But what has the decade really done for investors?
We’ve had a couple of stock consolidations over the decade, with one back in 2004 followed by another in early 2014 when Vodafone’s stake in Verizon Wireless was sold.
Adjusting for those, we see an 8% rise in the share price over 10 years, which would take a £10,000 investment up to £10,818 today. That’s a pretty lousy return by any standards — better than losing money by investing in a bank, but it wouldn’t even match cash in savings account.
The capital appreciation on its own, however, ignores ten years of dividends, plus the rather large return of value that happened as a result of the Verizon sale, and that makes an enormous difference.
Shareholders received a cash payment of 72p per share, plus shares in Verizon Communications, for a total return value of 102p per share. The share price fell at the same time to account for the cash and equivalents taken out of the company, and that’s why just on share prices alone the investment doesn’t look much.
Our £10,000 investment would have bought us 5,300 shares, which means the Verizon return value of 102p per share would have added £5,406 to our total, giving us a bit over £16,200 for our effective capital appreciation.
Then there are ordinary dividends to account for, and they’ve been providing annual yields of better than 4% for a large part of our decade. Over 10 years they’d have taken our investment pot up further to a very nice £20,367 — more than doubling our initial investment. In fact, if we were to treat the Verizon payment as dividend, it would take the effective yield that year to more than 40%!
But what if we had reinvested our annual cash, plus our Verizon windfall, in new Vodafone shares every year?
The consolidation-adjusted share price hasn’t actually moved much during our investment period, but the price has been erratic — and the pound-cost-averaging that that would have brought us would have given us an extra £3,089.
So, overall, with all dividends reinvested in Vodafone shares, we’d have turned £10,000 into £23,456 in 10 years.
The next ten
Including reinvesting the Verizon return, we’d be starting the next decade with nearly 11,500 shares instead of the 5,300 we started with. I don’t know what the next 10 years will bring, but that looks like a pretty good start to me.