TLDR
- Vodafone completed a buyback of 14.2 million shares through Citigroup as part of its ongoing €2 billion share repurchase program
- The stock has risen 15% over the past 12 months, recovering from a February 2023 low of 63p to around 80p
- Full-year revenue grew 2% to €37.4 billion with service revenue up 5.1%, driven by strong performance in Africa and Turkey
- High-growth markets now generate two-thirds of the company’s adjusted free cash flow under CEO Della Valle’s restructuring
- Analysts forecast a median price target of 84.5p, suggesting potential total returns of 9.5% including dividend yield
Vodafone has just pulled the trigger on another major share buyback. The telecom giant purchased 14.2 million ordinary shares from Citigroup Global Markets Limited.
This move is part of the company’s larger €2 billion share repurchase program. The shares will be held in treasury, potentially boosting earnings per share by reducing the number of shares in circulation.
The buyback comes as Vodafone shows signs of recovery under CEO Margherita Della Valle. She took the helm in April last year and has been working to turn around the struggling telecom.
The stock has climbed almost 15% over the past 12 months. Most of those gains came in the recent quarter, pushing the share price to around 80p.
That’s still a far cry from the dotcom boom peak of over 500p. But it represents a solid recovery from the miserable low of 63p hit in February 2023.
The latest full-year results released on May 20 showed promise. Revenue rose 2% to €37.4 billion, with service revenue jumping 5.1%.
Africa and Turkey were the star performers. Africa posted growth of 11.3% while Turkey surged 83.4%.
Strategic Shift Toward High-Growth Markets
Della Valle’s strategy focuses on high-growth markets. These regions now generate two-thirds of Vodafone’s adjusted free cash flow.
“Vodafone has changed,” the CEO said when announcing the results. The company has reshaped its portfolio to lean more heavily on these faster-growing areas.
The transformation hasn’t been without pain. A €4.5 billion impairment charge pushed the group to a €400 million operating loss.
But the board still felt confident enough to confirm the €2 billion share buyback program. This suggests management believes the worst is behind them.
The dividend tells a different story though. Shareholders have endured years of cuts and disappointment.
The payout was slashed by 40% in 2019 to nine eurocents per share. It stayed flat for five years before being halved again to just 4.5 cents in 2025.
Dividend Recovery on the Horizon
The current trailing yield sits at 4.75%, covered 1.7 times by earnings. Forecasts show the dividend dipping slightly to 4.2 cents in 2026.
But there’s hope for 2027. The dividend is expected to nudge higher to 4.3 cents, with coverage improving to 2.1 times.
This could finally mark the end of the dividend destruction that has plagued shareholders for years. The stock trades at a price-to-earnings ratio of 11.7, suggesting potential value.
Debt remains a concern though. The group’s debt pile stands at €31.8 billion as of September 2024.
That’s down from previous levels thanks to asset sales. But it’s still a heavy burden that limits financial flexibility.
Capital expenditure will remain high too. The VodafoneThree merger in the UK will require £1.3 billion in the first year alone.
The tie-up should deliver £700 million in annual cost and capex savings within five years. But that’s a long wait for benefits to materialize.
Return on capital employed sits at just 0.6%. This reflects years of underperformance and capital destruction.
Analysts see limited upside in the near term. Fourteen analyst forecasts show a median one-year price target of 84.5p.
That represents a gain of just under 5% from current levels. Combined with the dividend yield, total returns could reach 9.5%.
For a £10,000 investment, that would mean returns of £10,950 over 12 months. The stock currently trades with a market cap of £19 billion and average daily volume of 106 million shares.
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