I think the Vodafone (LSE: VOD) share price might be set for a comeback, after a 58% slump over the past five years.
First-half results on Tuesday (12 November) did fail to impress, mind, pushing the shares down 8% on the day.
But now on Thursday, Vodafone has announced its next share buyback worth up to â¬500m.
Mixed half
At H1 time, the company’s previous â¬500m buyback tranche was “almost complete, with 1.2bn shares repurchased for â¬1bn by 11 November 2024.”
First-half operating profit rose by 28.3%. But Vodafone put that down primarily to â¬0.7 billion from the disposal of an 18% stake in Indus Towers in India in the first quarter.
Perhaps of most concern, service revenue in Germany fell by 6.2%. Excluding the effect of a law change lowered it to 2.4%, but it’s still a fall.
In all, I’m not seeing much in the way of results from Vodafone’s 2023 transformation plan yet.
We will simplify our organisation, cutting out complexity to regain our competitiveness. We will reallocate resources to deliver the quality service our customers expect and drive further growth from the unique position of Vodafone Business. — CEO Margherita Della Valle, May 2023
Mixed messages
It’s a long-term thing and maybe it’s still too early to tell. Perhaps I’m being a bit impatient. But to me, Vodafone is sending confusing signals.
It couldn’t keep paying its huge dividends, but it can afford these share buybacks.
We’re in the midst of a company transformation thatâs going to cost money, but the priority seems to be handing back another spare half a billion.
To be fair, Vodafone did raise â¬5.4bn in cash from the disposal of Spanish assets and parts of its stake in Vantage. And a one-off buyback return can make more sense than a committment to bigger dividends.
The board might also see the Vodafone share price as so low now that it’s worth spending every penny it can. But it still makes it tricky for me to see where the focus lies, and that’s been my main concern for years.
Brighter future?
I worry that these share buybacks might simply be an attempt to shore up Vodafone’s dwindling share price. Or is that a bit too cynical?
It might sound like I have a serious downer on Vodafone. But I really don’t see it that way, and here’s what I think is the good stuff.
The dividend yield reached over 10% before the 50% cut came in. But with the shares down, forecasts now put the new yield at 8.2%. That’s still one of the FTSE 100‘s biggest, and it should be well covered by forecast earnings.
We’re looking at a forecast price-to-earnings (P/E) ratio for this year of a below-average 11, maybe fair in the circumstances. But forecasts have it dropping to just 8.4 by 2027.
If the Vodafone transformation comes good, that might turn out to a steal. But the âifâ isnât a done deal yet.
The post Can a â¬500m buyback kickstart the Vodafone share price? appeared first on The Motley Fool UK.
5 Shares for the Future of Energy
Investors who don’t own energy shares need to see this now.
Because Mark Rogers — The Motley Fool UK’s Director of Investing — sees 2 key reasons why energy is set to soar.
While sanctions slam Russian supplies, nations are also racing to achieve net zero emissions, he says. Mark believes 5 companies in particular are poised for spectacular profits.
Open this new report — 5 Shares for the Future of Energy — and discover:
Britain’s Energy Fort Knox, now controlling 30% of UK energy storage
How to potentially get paid by the weather
Electric Vehicles’ secret backdoor opportunity
One dead simple stock for the new nuclear boom
Click the button below to find out how you can get your hands on the full report now, and as a thank you for your interest, we’ll send you one of the five picks — absolutely free!
Grab your FREE Energy recommendation now
More reading
As the Vodafone share price slides 6% on lacklustre H1 results, what does the future hold?
3 ISA mistakes to avoid
2 high-yield FTSE 100 shares I’d consider buying for passive incomeâ¦and one I’d avoid
2 brilliant bargains I’m considering for my Stocks and Shares ISA!
How cheap is the 72p Vodafone share price?
Alan Oscroft has no position in any of the shares mentioned. The Motley Fool UK has recommended Vodafone Group Public. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
