Vodafone's dividend might not be sustainable, Kepler suggests
Vodafone Group
69.34p
16:35 24/04/24
Broker Kepler Cheuvreux began coverage of Vodafone with a 'reduce' rating and a price target of 180p on the telecoms giant.
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Mobile Telecommunications
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16:59 24/01/22
Vodafone chief executive Vittorio Colao revealed in May that he will step down later this year, after ten years in charge, to be replaced by chief financial officer Nick Read. This was announced alongside a solid set of annual results, with Colao having returned the group profit and guided to further growth in 2019 despite sales being held back by increased competition in Italy and Spain.
The FTSE 100 group appears to be positioning itself in its various markets as an alternative to domestic incumbents, analysts said, which will require it to buy and build additional scale.
"These moves, combined with its relatively high dependence on wholesale access, suggest that short-term convergence will likely remain a low-return opportunity."
Despite its convergence push, the company is still mostly focused on mobile, meaning growth depends on its monetisation of mobile data.
"The combination of higher capex, a lack of data monetisation, M&A leverage and upcoming spectrum auctions, entail risk to cash flows and ultimately the dividend; risks that, in the event of a deal with Liberty, would not be sustainable," analysts wrote, suggesting yield-hunting investors wold be better served elsewhere.