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Vodafone cuts dividend: are the shares still worth holding?

14/05/2019 · Vodafone (VOD) 

Dividends FTSE 100 News Politics

Vodafone headquarters building at night

Vodafone has cut its dividend for the first time in nearly 30 years, but shareholders don’t seem surprised – probably because the yield exceeded 10% yesterday and was a major red flag. The income now is still pretty generous based on the current share price and looks far more sustainable. But we’re worried about the group’s ambitious growth plans. 


Most investors hold Vodafone (LON: VOD) for its generous dividend which hadn’t been cut since the group listed in London in 1988. In recent years, the telecoms giant has managed to deal with a €19bn investment project, the launch of its 4G network and rising competition in India without trimming its pay-out. But 5G and a mammoth European acquisition have proved too much. With net debt expected to rise beyond 3 times adjusted cash profits once the group buys the European assets of Liberty Global, management have cut an almighty 40% off the 2019 dividend.

But Vodafone’s share price is down 16% so far this year and 36% in the last 12-months, which means the 9¢ 2019 dividend still yields 6%. No exact forecasts have been given for 2020, but as the company plans to keep up its progressive dividend policy, we can assume the forward yield is also at least 6%. Thus, there is still value in this company for British…

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