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Retirement saving: why I think Vodafone could help you to get rich with a Lifetime ISA

A Lifetime ISA could prove to be a sound means of planning for retirement. It offers tax advantages, as well as a government bonus. It also provides greater flexibility than a pension, which could make it more appealing to a broader range of people.

Within a Lifetime ISA, holding shares such as Vodafone (LSE: VOD) could prove to be a shrewd move. The stock now offers a high yield after a disappointing period for its shares. As such, there could be recovery potential alongside another FTSE 100 company which released an update on Tuesday.

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Uncertain outlook

The company in question is silver and gold miner Fresnillo (LSE: FRES). Its full-year results showed that 2018 was a challenging year for the business. Although silver production reached a record level, it was behind previous expectations. This was mainly due to lower than expected ore grades, as well as some operational issues.

The company is taking action to address the challenges it faced in 2018. However, its shares have come under pressure, declining by a third over the last year. While disappointing, the company has a strong financial position and a significant exploration pipeline.

Fresnillo’s financial performance is clearly linked to the price of gold and silver. While they have risen significantly in recent months, the potential for an uncertain period for the global economy may lead to further growth. As such, now could be a good time to buy the stock, with it potentially offering a rising dividend, as well as a yield of almost 3% at the present time.

Low valuation

The Vodafone share price has also declined heavily in the last year. It is down by around 34%, and has been unable to move higher despite a rising FTSE 100 since the start of the year.

It is, of course, a time of change for the telecoms company. It has a new CEO, while it is continuing to press ahead with M&A activity. This comes at a period of time where the wider mobile telecoms industry is investing heavily in the next generation of technology, which is likely to lead to pressure across a number of companies’ balance sheets.

An obvious move for Vodafone to make in order to go ahead with its investment strategy is to cut its dividend. As such, investors appear to have priced this possibility into its valuation, with it now having a yield of over 9%.

While this risk could hold back the company’s shares, it also means that they now appear to offer a margin of safety. With a strong position in an industry that could generate improving growth figures in the long run, the stock may have an appealing risk/reward ratio. While unpopular, it could prove to be a worthwhile holding that is able to offer recovery potential after a challenging period.

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Peter Stephens owns shares of Fresnillo and Vodafone. The Motley Fool UK has recommended Fresnillo. 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.