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£1k to invest? I think this is one of the best FTSE 100 stocks to buy right now

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On Tuesday, UK telecoms giant Vodafone (LSE: VOD) released its full-year preliminary results for 2020. Safe to say, the news release detailed an impressive set of results in light of current circumstances. Here’s why I think the company is one of the best FTSE 100 stocks to buy right now.

Financial performance

Vodafone’s share price has performed poorly over the past five years, declining steadily by around 47%. Things quickly worsened in the depths of the stock market crash when the group’s share price plummeted by 36%.

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Since then, the shares have staged a bounced back and upon release of yesterday’s results rose by 8%, helping the FTSE 100 to finish up at 5,994 points.

The company reported growth in both revenue and free cash flow, rising by 3% and 12% respectively. What’s more, Vodafone’s resilient business model seems to have facilitated a strong performance throughout the Covid-19 pandemic so far.

Best FTSE 100 stock?

The telecoms provider offers a range of products and services that have come to be relied upon in the 21st century, especially during the Covid-19 pandemic. After all, lockdown restrictions have reinforced the reliance we have on our mobile phones or broadband.

What’s more, thanks to a strong financial performance amid widespread economic uncertainty, the group recently confirmed its dividend. This means that Vodafone joins the ranks of a select few FTSE 100 companies that have so far pledged to maintain dividend payments.

That’s great news for income investors, especially considering the current yield of 6.5%.

Despite a relatively high P/E ratio of 24.5, the shares are cheaper now than they have been for a long while. This time last year, the P/E was over 30. As for today, I think the high ratio is justified by the company’s exciting prospects.

Promising outlook

Looking ahead, Vodafone has a bright future in my eyes. Though the group expects to take a hit to earnings in the short term, I reckon this should be minimal. For many, the products and services offered by Vodafone are essential. That means they will be used and purchased in times of recession, as well as prosperity.

Moreover, the company is taking steps to reduce its debt, which has long been a concern for investors. So far, actions have been taken to sell European tower assets and various under-performing operations around the world in order to raise cash.

With the rollout of 5G on the horizon, Vodafone looks set to perform well over the long term. Provided it can fend off competition, its earnings could be massively boosted by the company’s efforts in developing the 5G network.

All things considered, I expect Vodafone to come out of the current crisis in good shape. As we continue to move toward an ever-more-digital future, I think Vodafone is one of the best FTSE 100 stocks investors could buy right now.

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Matthew Dumigan has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.

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