Page 1 of 3
Vodafone may need to cut dividend, Jefferies warns
Posted: October 9th, 2018, 10:47 am
by idpickering
Vodafone's dividend is too generous for its operating prospects, said Jefferies, downgrading the mobile operator's shares to 'hold' from 'buy'.
Vodafone "is structurally squeezed", Jefferies said, being neither a "national champion" deploying superfast fibre to customers homes, "nor pay TV leader nor remedy-taking challenger".
Jefferies said the "need to focus on debt reduction" means that even a large dividend cut "will not free up resources to invest more into projects that might enhance earnings growth organically" to deal with these structural inadequacies.
https://uk.webfg.com/news/broker-recomm ... 25154.html
Re: Vodafone may need to cut dividend, Jefferies warns
Posted: October 9th, 2018, 11:06 am
by monabri
And this from Jefferies who last indicated a price of 240p.... now downgraded to 165p. You would think that VOD was a well researched company and for them to issue a previous "price target" and then drop it by over 30% smacks of them really not knowing what they are doing and are simply following the price momentum.
Re: Vodafone may need to cut dividend, Jefferies warns
Posted: October 9th, 2018, 11:31 am
by idpickering
monabri wrote:And this from Jefferies who last indicated a price of 240p.... now downgraded to 165p. You would think that VOD was a well researched company and for them to issue a previous "price target" and then drop it by over 30% smacks of them really not knowing what they are doing and are simply following the price momentum.
I do tend to agree with your sentiments monabri. I've just said in my IDP October top up thread that the VOD top up still stands, cheers.
Ian.
Re: Vodafone may need to cut dividend, Jefferies warns
Posted: October 9th, 2018, 11:40 am
by Dod101
I would not pay much attention to what an 'analyst' has to say but I do not think they are alone in being concerned about Vodafone's dividend. A yield of over 8% has always been a good warning signal. I hold but would not be surprised if it were cut.
Dodf
Re: Vodafone may need to cut dividend, Jefferies warns
Posted: October 9th, 2018, 12:43 pm
by idpickering
Dod101 wrote:I would not pay much attention to what an 'analyst' has to say but I do not think they are alone in being concerned about Vodafone's dividend. A yield of over 8% has always been a good warning signal. I hold but would not be surprised if it were cut.
Dodf
Likewise Dod, to be honest. VOD, an investment if you dare. The sp has been hammered of late and I like a bargain....hopefully
Ian
VOD to hold dividend...
Posted: November 11th, 2018, 9:38 am
by monabri
There was an article in the Telegraph today ( locked, unfortunately). Here's a snippet
"It is understood that Mr Read will maintain the existing policy of steadily increasing cash returns for shareholders. Analysts at Citi told clients there was a “consistent view that there is no near-term risk to the dividend”"
(Mr Read being the new CEO)
https://www.telegraph.co.uk/business/20 ... t-worries/"Moody’s expects Vodafone’s debt to reach up to 3.6 times its underlying earnings in the next year and has put the operator’s rating under review for a downgrade that would make borrowing more expensive."
Noting that completion of the deal to buy Liberty Global will add £11 billion of new liabilities and the cost of 5G licences ( £2 billion for Italy alone).....
"Macquarie analyst Guy Peddy said: “Maintaining current dividend policy will merely prolong the sustainability discussion and the new CEO has only six months to change its policy in our view.”"
( A second article on VOD in the Telegraph reckons that the completion of the liberty Global deal will add 8 billion euro to the debt...a bit different than the £11 billion figure... )
Re: VOD to hold dividend...
Posted: November 11th, 2018, 9:56 am
by Walrus
I'm really hoping that the board of directors actually have a contingency plan regarding the Liberty acquisition, the board seem convinced that the cash flows are more than enough to finance the debt and continue to pay a growing dividend whereas the market hates it.
I see there scenarios here
1) Directors correct, Vod is a great investment
2) Directors inept/ poor assumptions leading to disastrous investment followed by dividend cut and equity raising.
3) Directors living in cloud cuckoo land kicking the can along the road collecting wages. Acquisition doesn't go through, dividend cut share price stabilises.
The market clearly hates it, there's a hell of a lot of uncertainty and if I had my time again I wouldn't have invested in it. I will continue to hold it but no more top ups for me.
VOD (2)
Posted: November 11th, 2018, 9:58 am
by monabri
An unlocked article
https://www.thisismoney.co.uk/money/mar ... -pile.html"Speaking in New York, Read told investors: 'We're confident in the dividend policy that we have and that remains the case.
'We did the Liberty Global transaction. Then we said we will de-lever over time, through two levers. One is the expansion of earnings; and the other one is disposal of assets.
The article discusses cash flow supporting both the dividend and the cost of new 5G licences. (My question...have they underestimated the likely cost of acquiring the new licences based on the higher than expected cost in Italy?)
VOD (3)
Posted: November 11th, 2018, 10:10 am
by monabri
One group are not happy about VOD doing the Liberty deal!
https://uk.reuters.com/article/uk-liber ... KKCN1NC0Z2Business group representing German broadband providers called on European Union regulators to block the takeover by Vodafone (VOD.L) of Liberty Global’s (LBTYA.O) German operations, saying it would hurt competition."
Personally, I wouldn't be surprised to see the deal not being allowed simply because of political reasons but dressed up along the lines suggested in the article
"The EU Commission must block the planned takeover, because mergers that hinder effective competition aren’t compatible with the law"
Re: VOD to hold dividend...
Posted: November 11th, 2018, 10:11 am
by Dod101
There is also an article in the Sunday Times this morning and I think the general consensus seems to be that they will dispose of assets rather than cut the dividend. However Elliott is now on the share register and it will be very interesting to see what they may or may not want.
I hold Vodafone but am not a happy holder. I will probably continue to hold pro tem anyway.
Interesting week with Vodafone posting on Tuesday and B Land and SSE on Wednesday. None of the three is a very good prospect at the moment. Glad I sold Land because they talk of a reduction in the valuation, knocking the discount to NAV. The market has been telling us this for some time, just as it is worrying about Vodafone's dividend.
Dod
Re: VOD to hold dividend...
Posted: November 11th, 2018, 10:41 am
by Raptor
Moderator Message:
Have merged all VOD threads, keeping a single VOD thread for discussion. Raptor.
Re: VOD to hold dividend...
Posted: November 11th, 2018, 11:51 am
by BT63
I've had a holding in VOD for many years but I think the dividend is unsustainable, with a cut to half its current level being a probability rather than a possibility within the next few years.
I'm happy to do nothing because:
VOD only comprises about 3% of my portfolio.
The holding doesn't owe me anything.
Halving the dividend would still give ~4.5% yield.
Re: VOD to hold dividend...
Posted: November 11th, 2018, 11:56 am
by Itsallaguess
BT63 wrote:
Halving the dividend would still give ~4.5% yield.
It might give a 4.5% yield on
today's share-price, but if the dividend were to be cut in half then I wouldn't expect today's share-price to last very long....
Cheers,
Itsallaguess (holds VOD...)
Re: VOD to hold dividend...
Posted: November 11th, 2018, 11:58 am
by Walrus
Itsallaguess wrote:BT63 wrote:
Halving the dividend would still give ~4.5% yield.
It might give a 4.5% yield on
today's share-price, but if the dividend were to be cut in half then I wouldn't expect today's share-price to last very long....
Cheers,
Itsallaguess (holds VOD...)
Interesting comment that. Genuinely think a divi cut is priced in. Wouldn't surprise me if a dividend cut announcement would actually increase the share price....
And to add some colour to that, it would give the impression management knew what they were doing somewhat. Cutting the div to invest in prospective decent returns on investment is a much better story than , management not costing acquisitions appropriately.
Re: VOD to hold dividend...
Posted: November 11th, 2018, 12:11 pm
by BT63
Itsallaguess wrote:BT63 wrote:
Halving the dividend would still give ~4.5% yield.
It might give a 4.5% yield on
today's share-price, but if the dividend were to be cut in half then I wouldn't expect today's share-price to last very long....
Cheers,
Itsallaguess (holds VOD...)
With the share price having already weakened considerably and with a dividend cut actually being very beneficial for VOD's finances, it's possible that a cut is either priced in or would be viewed as a good thing by the market. Stranger things have happened.
And if a dividend cut causes the share price to fall, the yield will be even higher.
Also, if planned acquisitions/disposals do/don't happen, the share price could respond positively.
The final dilemma is that switching out of VOD into something else with a high-ish yield could just be jumping from the frying pan to the fire.
Re: VOD to hold dividend...
Posted: November 11th, 2018, 12:20 pm
by Walrus
BT63 wrote:Itsallaguess wrote:BT63 wrote:
Halving the dividend would still give ~4.5% yield.
It might give a 4.5% yield on
today's share-price, but if the dividend were to be cut in half then I wouldn't expect today's share-price to last very long....
Cheers,
Itsallaguess (holds VOD...)
With the share price having already weakened considerably and with a dividend cut actually being very beneficial for VOD's finances, it's possible that a cut is either priced in or would be viewed as a good thing by the market. Stranger things have happened.
And if a dividend cut causes the share price to fall, the yield will be even higher.
Also, if planned acquisitions/disposals do/don't happen, the share price could respond positively.
The final dilemma is that switching out of VOD into something else with a high-ish yield could just be jumping from the frying pan to the fire.
There is a chance management know what they are doing. I'm sitting on my hands, but now at 4 percent of my portfolio this one could hurt
Re: VOD to hold dividend...
Posted: November 11th, 2018, 1:37 pm
by Dod101
I am not a great believer in the 'frying pan into the fire' argument but I am inclined to think that at current levels a dividend cut is more or less priced in, not that that would help my income which I am more concerned about. If they do cut though it will not be to find funds to invest in the business (per Walrus) but probably to reduce the borrowings somewhat, although a more effective way to do is probably to sell assets.
I will keep for the time being.
Dod
Re: VOD to hold dividend...
Posted: November 11th, 2018, 1:46 pm
by MaraMan
I too am concerned about what seems to be an inevitable dividend cut and have as a result decided to sell my holding. I know this is very un-dorisike but I am not happy with the way the company has been run and am not interested on a gamble on the new management. My feeling is that it will be a very slow recovery and I would prefer to invest those funds elsewhere at the moment. I hate to tinker, but sometimes I can justify it to myself.
Good luck to the remaining holders.
MM
Re: VOD to hold dividend...
Posted: November 11th, 2018, 5:22 pm
by jackdaww
some very quick back envelope sums...
my holding cost me around 28k.
current value is about 22k .
however totting up the dividends since 2007 gives about 25k !!
so it doesnt seem so bad after all.
Re: VOD to hold dividend...
Posted: November 11th, 2018, 5:58 pm
by monabri
A question for the more experienced HYPers here, did these type of conversations occur when RDSB was discussed a couple of years ago when the share price was in the doldrums?
For a CEO to state the plan is to
maintain an increasing dividend and then cull it will be a career limiting move.
"It is understood that Mr Read will maintain the existing policy of steadily increasing cash returns for shareholders. Analysts at Citi told clients there was a “consistent view that there is no near-term risk to the dividend”
Of course, he might say we've misunderstood him!
(VOD is approx 3.5% of my portfolio but as a new addition I've not had the benefit of umpteen years of divis so it is "underwater" investment wise
).
In the case of VOD..I think I'll be sitting on my hands and doing nothing.