VOD - any views?

[Jonetc15]

Very weak share performance recently. Any views as to whether a potential dividend cut may be the reason?

Jon

[tjh290633]

Think back to the time when VOD was just over a pound. I bought at 111p on 16 Aug 2006. Added more in October at 135p and again in March 2007 at 141p. Then trimmed back when overweight in November 2007 at 186p. Topped up in December 2012 at 162p, then sold to avoid getting Verizon in February 2014 at 218p, bought back in XR a few days later at 250p, added some more in June 2014 at 195p and again in February 2016 at 210p. Over all that time the dividend has risen steadily from 7.51p in 2007-8 to 13p in the last full year, when they switched to Euro accounting. The last interim, just paid, was increased.

I think concerns, if any, are more down to the possible corporate actions involving Liberty Media. My rate of return has been about 11% per annum. I see no reason to get worried, even if the yield is over 6%.

TJH

[monabri]

The general view "in the media" is that the free cash flow is improving (and it is based on 1 set of results in March 17 in MorningStar) and that the divi will be soon be covered. There is some way to go at the moment.

Since they have maintained the divi during the "bad times" and things are hopefully improving then I see them as a "hold".

[CommissarJones]

Any views as to whether a potential dividend cut may be the reason?

Unlikely, IMV.

- VOD's free cash flow seems healthy enough, if maybe a little close for comfort. FCF was €4.1 billion in the financial year that ended in March 2017, versus dividends paid out of €3.7 billion, and the company is targeting FCF of about €5 billion for the current year. However, that's before m&a, spectrum and restructuring costs, so there are potentially other calls on that dosh.

- The company has an explicit progressive dividend policy, and I am unaware of any recent indication of change that might make a divi cut necessary.

- VOD was sitting on €9.3 billion of cash at the end of the most recent fiscal year, so liquidity does not seem to be an issue, to say the least.

- The business itself seems to be healthy enough, with the major trends being reviving revenue in Europe (VOD's main market) and seemingly endless growth everywhere in demand for data.