At 69p, is the Vodafone share price the biggest bargain on the FTSE 100?
Picture supply: Vodafone Group plc
I’ve been looking out the FTSE 100 for my subsequent purchase and the Vodafone (LSE: VOD) share value has caught my consideration.
Proper now, the inventory seems to be extremely low-cost at simply 69p. At that value, may it’s the largest discount on the Footsie?
A poor efficiency
I first need to have a look at what has received the inventory to its present value. Let’s begin by going again 5 years.
Again then, a share within the telecommunications stalwart would have set traders again 139p. Meaning Vodafone inventory has misplaced 50.9% of its worth throughout that point.
Within the final 12 months, its share value has adopted the same trajectory. A yr in the past, a share value simply shy of 93p. That’s 26.7% greater than it prices as we speak.
That makes grim studying for Vodafone shareholders. It has posted a comparatively higher efficiency in 2024, primarily flatlining. Nonetheless, it’s not nice when you think about that the Footsie has climbed 8.6% and plenty of UK-listed corporations have excelled.
The place subsequent?
However as an investor, I’m not one to dwell on the previous. It could actually assist me make extra knowledgeable choices. However I’m extra aware about how a inventory can carry out within the years to return. Subsequently, Vodafone’s slashed share value may very well be a possibility for me to snap up a discount.
However do I believe that is the case? In all honesty, no.
I can see why some traders view Vodafone as a beautiful funding for underneath 70p. The enterprise has began its turnaround underneath CEO Margherita Della Valle and he or she’s emphasised streamlining the agency’s operations. As a part of this, Vodafone offloaded its Spanish enterprise for €5bn.
It has additionally agreed phrases to get rid of its Italian ops for €8bn. With the cash it generates, the enterprise plans to scale back its debt.
I’m steering clear
Besides, I see too many points with Vodafone.
Whereas it has plans to scale back its debt, the pile remains to be huge. As of September 2023, it stood at €36.2bn. With the UK base charge at 5.25%, it will solely make it harder to scale back.
What’s extra, whereas it at the moment affords a whopping 11.2% dividend yield, all is just not because it appears on the floor. That’s as a result of its dividend might be lower in half in 2025.
In all equity, I believe that’s a sensible transfer. For years market spectators have been questioning how sustainable Vodafone’s yield is. Now with plans to scale back it, it will unlock €1bn a yr for the enterprise going ahead.
Meaning its new yield works out at round 5.6%. That’s nonetheless above the common Footsie payout (3.9%). However for me, Vodafone loses its enchantment with out its index-leading yield.
Higher choices on the market
As such, I’ll be avoiding including any of its shares to my portfolio. On paper, they could appear to be a discount. However I believe there are higher choices for traders on the market to think about.