Among the UK stocks, FTSE 100-listed Vodafone Group PLC (GB:VOD) recently announced a dividend cut from €0.09 to €0.045 per share going forward in FY25. However, the company will maintain its total payout for FY24 consistent at €0.09 per share. The dividend cut was largely anticipated by the market, providing a breather to VOD’s leverage policy. Overall, the stock continues to be a reliable option for income investors seeking to enhance their passive income. Currently, Vodafone carries a dividend yield of 11.6%, surpassing the sector average of 2.54%.
In Fiscal 2024, Vodafone declared an interim dividend of €0.045 per share, paid in February 2024. This was similar to the dividend paid in the first half of FY23. The company believes that the reduced dividend from FY25 has been set at a sustainable level, which would ensure the right amount of cash flow to provide sufficient flexibility for making growth investments.
The FTSE 100 index hosts a wide range of dividend-paying stocks. To make the selection process easy, TipRanks provides multiple tools to identify the right dividend stock, matching the users’ preferences. For instance, the TipRanks Top Dividend Shares for the UK market compiles a comprehensive list of high-dividend-paying companies.
Vodafone is a prominent European telecommunications company that provides voice, messaging, and internet services for fixed and mobile networks.
Vodafone’s Divestment and Dividend Cut
In March, Vodafone announced the sale of its Italian unit to Switzerland-based Swisscom AG (DE:SWJ) for €8 billion in cash. Alongside this transaction, the company unveiled its intention to decrease dividends starting in FY25. Furthermore, it plans to allocate €4 billion from the proceeds of the sale of its units in Italy and Spain towards share buybacks in FY25.
The sale was part of the company’s efforts to streamline its portfolio, focusing more on expanding telecom markets and leveraging its strong position to drive consistent growth in Europe. According to its trading update for the third quarter of FY24, Vodafone maintained positive service revenue momentum in Europe and African regions. The company reported a service revenue year-over-year growth of 4.7% in Q3.
With the sale, Vodafone also announced plans to strengthen its balance sheet with a new leverage policy. This policy sets the net debt to adjusted EBITDAaL (earnings before interest, tax, depreciation, and amortisation, after leases) ratio between 2.25x times and 2.75x. Moving forward, the company is poised for better growth opportunities, with its turnaround policies and a stronger balance sheet.
Is Vodafone a Buy or Sell?
Overall, analysts maintain a Hold stance on Vodafone stock. According to TipRanks consensus, VOD stock has received three Buys, six Holds, and one Sell recommendation. The Vodafone share price target is 87.60p, reflecting an upside of 27% from the current trading level.
