Why Vodafone Group plc Is A Top ISA Buy

vodafoneVodafone (LSE: VOD) (NASDAQ: VOD.US) has been a staple of ISAs in recent years, thanks to a combination of factors including a FTSE average-beating yield, global interests and its joint-venture, Verizon Wireless.

Of course, the latter has now been sold to its former partner Verizon Communications, which now owns Wireless in its entirety, and while investors were piling into Vodafone as the deal was being worked out in order to get involved with the tasty special dividend that was expected, now many are ‘cashing out’ as the demerger has been completed.

While it’s hard for a company this large to rapidly fall from grace without a far-reaching incident — Deepwater Horizon or the credit crunch, anyone? — there are indications that Vodafone has less of a place in investor’s hearts now it no longer has the cash-generative Verizon Wireless on its books. It also has vast exposure to some of Europe’s most troubled economies, including Spain, which is no quick fix.

So why do I still rate Vodafone as an ISA investment for your self-select stocks and shares ISA before the 5 April deadline?

Well, that yield is still attractive. Currently sitting around 4.1%, that’s more than the FTSE 100 average of 3.5%, while that lifts to a possible 4.7% on forecasts. The dividend is also covered one and a half times, which is reassuring as an investor.

Elsewhere, while it may have lost the income from Verizon Wireless, management have been busy diversifying (there’s that word again) and expanding their business, buying Kabel Deutschland to give them a solid fixed-line business and all-important entry point into Germany.

The company remains cash-rich, and rumours continue to swirl around the City that it’s interested in a major deal for BSkyB; not only that, but Vodafone itself could be a takeover target from the likes of Stateside giant AT&T, which could fill the coffers.

Europe remains less than buoyant, but Vodafone has a huge reach across 80 countries worldwide. While it’s important to diversify your investing portfolio to minimise any collateral damage from an underperforming area, the same principle applies to global companies — while parts of Europe may be in ‘recovery mode’, Vodafone’s vast exposure spanning the world puts it in a good position to remain relatively trouble-free across the long term.

Finally, I believe that Vodafone still offers the best mix of dividend growth and high income from the telecoms companies in the FTSE 100. BT seems to be the darling of the sector at the moment, but I prefer to buy good quality companies at beaten-down prices — and for me, Vodafone appears ripe for the picking.

As I've alluded to, when selecting shares for your ISA you ought to think long term -- the real money isn't made by selling every time there's an incremental rise, not with those pesky trading fees. Instead, you should consider shares that you're happy to 'buy and forget'.

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Sam does not own shares in Vodafone.