Vodafone share price: Analysts weigh in on telco’s dividend prospects

on Jun 1, 2016
Updated: Oct 21, 2019

Vodafone’s (LON:VOD) dividend is safe for now, Haitong Research has said, as it reiterated its neutral stance on the blue-chip telco. Old Mutual fund manager Stephen Message separately named the FTSE 100 group as one of his stock picks, noting that the company is benefitting from the adoption of 4G services which he argues will give the company more pricing power.

Vodafone’s share price shed 0.75 percent to close at 230.85p yesterday, largely in line with losses in the broader London market. The shares have lost just under 10 percent of their value over the past year.
Haitong reiterated its ‘neutral’ rating on Vodafone yesterday, with a price target of 210p. Interactive Investor quoted the broker’s analyst John Karidis as commenting that in the UK, the tie-up between BT Group (LON:BT.A) and EE could ‘materially dent’ Vodafone’s enterprise business, while the telco’s challenge against Virgin Media could be tricky. The analyst further cautioned that when assessing Vodafone’s dividend cover, investors should include the ‘big and recurring’ spectrum costs, which averaged an annual £2.3 billion in the five years to 2016.

“We think sentiment will stay fragile for good reason but the dividend is safe for now,” Karidis pointed out, as quoted by Interactive Investor.
In a separate development, Stephen Message, Manager of the Old Mutual UK Equity Income Fund, said in an interview with Morningstar’s Emma Wall yesterday that Vodafone was “seeing quite significant benefit” from the current trend of the adoption of 4G services and data services.
“Because ultimately it starts to charge more for its product. So it has invested in these products, starting to charge more for it which ultimately means it has got pricing power,” the fund manager explained, as quoted by Morningstar. “And probably if you start picking your prices up, then as an income investor the dividend to me start to grow quite nicely as well.”
As of 08:10 BST, Wednesday, 01 June, Vodafone Group plc share price is 230.85p.