There are only a handful of companies on the market that I’d consider owning for a decade or more. The Vodafone (LSE: VOD) share price falls into this basket.
The business has most of the characteristics I look for when considering a buy-and-forget investment. The qualities are relatively straightforward. I want to own companies with a powerful brand, robust cash flows and an international presence. I also like to hold corporations with strong balance sheets.
Vodafone ticks all of these boxes, apart from the last one. The company’s balance sheet is loaded with debt. However, after the planned spin-off of its European tower business (Vantage Towers), debt should fall dramatically. And when that happens, the firm should meet all of the criteria I look for in a buy-and-forget investment.
Attractive qualities of the Vodafone share price
Vodafone has come into its own this year. The telecommunications giant has provided a vital service for millions of people across Europe throughout the pandemic.
Over the past decade, the company has spent tens of billions of euros upgrading its network across the continent. This investment has paid off. Vodafone has been able to offer its customers an uninterrupted high-speed service in 2020. New customers have flocked to the business as a result.
Vodafone reported 65m European mobile contract customers at the end of the first half of its 2021 financial year. That was up from 63.8m in the prior period. The number of customers using the company’s African networks hit 84.5m up from 81.2m. Moreover, mobile contract customer loyalty improved year-on-year for the eighth successive quarter.
These numbers suggest to me the business has built a strong customer base, which should help it drive growth in the years ahead. That’s good news for investors. The more customers Vodafone has using its networks, the higher the company’s return on invested capital.
Based on the above, I’m optimistic about the outlook for the Vodafone share price. With customer numbers expanding, the group’s profits should grow in the years ahead. That should help support the dividend payout.
The stock already supports a market-leading dividend yield of around 7%. Payout cover has increased to 1.5 times. This suggests to me the distribution is well-covered and is unlikely to be reduced by management.
As such, I’m considering adding this income stock to my portfolio today. After several years of standing still, the company finally looks as if it’s returned to growth. This could lead to large total returns for investors in the years ahead.
And even if the Vodafone share price goes nowhere for the next 10 years, investors will be paid to wait. The dividend should provide a 7% annual return for the foreseeable future, even if earnings stagnate. All in all, I think I should be able to achieve large profits over the next decade by owning this stock.
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Rupert Hargreaves 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.