The Motley Fool

Reasons To Buy, Hold And Sell Vodafone Group plc

VodafoneVodafone (LSE: VOD) (NASDAQ: VOD.US) is one of the largest companies in the FTSE 100 and many private investors have differing opinions on the bank and its prospects.

So here’s a quick rundown of the key reasons why you may wish to buy, sell or simply hold on to the company’s stock.


First and foremost: the dividend. Vodafone currently pays out a 5.4% yield, ranking it up there among the best of the FTSE’s high yielders. With a raft of other dividend-paying stocks slashing their payouts recently — think Tesco and De La Rue, while the smart money is on Morrisons‘ yield to be chopped sooner rather than later — Vodafone’s dividends seem more safe than some of its fellow income stock brethren, and is substantially above the FTSE 100 average of 3.5%.

What’s more, it’s pulling in a net profit margin of 30% despite tricky headwinds following market saturation. In order to combat these, Vodafone is pushing ahead with its Project Spring programme, which aims to update its entire European network in order to put it head and shoulders above its competitors.


Ah, yes, Project Spring. It’s a ballsy move, one that’s costing the company £19bn, and management expects it will bring in an extra £1bn in free cash flow per year — but not until 2019. A long-term play, then, but Vodafone has never been a stock to ‘make a quick buck on’, to borrow a phrase from our US cousins: often moving in line with the Footsie, the telecoms company is roughly flat compared to its share price of 18 months ago, when rumours surfaced — and were substantiated — that Verizon Communications was looking to take full control of their joint venture, Verizon Wireless.


Which leads us nicely onto a possible reason to sell. Wireless was a cash cow for Vodafone, which management more often than not decided to return to shareholders in the form of special dividends. Without this, and returning to our earlier observation that Vodafone has a large exposure to slowly recovering Europe, its near-term prospects aren’t encouraging. These issues have been reflected in company update after company update, offset by management talking up Project Spring, the amount of faith in which bringing to mind the phrase ‘a wing and a prayer’ to me.

What now?

Of course, what action to take on Vodafone is something only you can decide. But the Motley Fool's top analysts believe that only a handful of companies will actually make big gains this year, so I highly recommend that you read their brand-new report into Where We Believe The Smart Money Is Going In 2014.  

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Sam does not own shares in Vodafone.