Many investors look like they are holding Vodafone shares as a dividend play, with a 9% dividend yield making the stock one of the higher yielders in the FTSE 100. Vodafone shares are considered a blue chip stock, still poised to capitalise on the growth in the global telecommunications market and the associated deployment of smart technology via mobile devices.
But is now the right time to buy Vodafone shares?
Vodafone stock has been on a steady slide over the last 12 months and despite a couple of shallow rallies it has remained steadfastly in the area of 150 pence, although it has slipped further in recent weeks down to 140-41 pence. The big question is whether this makes it cheap enough to buy?
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Index Vodafone against the FTSE 100, and it looks like a steady under performer. Even over the 30 day picture, Vodafone shares have been walloped, down by more than 8% at one point and still off by 5% at the time of writing. It looks like there is still plenty of opportunity to lose money here.
Kelper Chevreux rated Vodafone shares a reduce in January, which had many traders reaching for the sell button. But since there a number of analysts have come in with buy or outperform ratings, among them UBS, Merrill Lynch and Credit Suisse. Analysts are targeting around 1.80 to 2.00 for the stock, which is still a long way off where it was last year.
So what has been causing problems for Vodafone shares and will things change?
Is this renewed optimism for Vodafone shares warranted? We like them for a number of reasons, but first and foremost it is now looking relatively cheap. If the pound gets sold off on a hard Brexit, you can expect the price of Vodafone to push upwards. The analysts seem to be switching to a more bullish outlook in recent weeks and a consensus is appearing.
Secondly, Vodafone is a leading brand in a technology area – mobile telecommunications and the Internet of Things – which is going to define much of the next 10 years in terms of media and data developments. The uptake in IoT is already pronounced, with a third of business globally making use of IoT.
Vodafone technologies are already embedded with connected vehicles like BMW and Mercedes Benz and also serve much of the smart metering technology being deployed by the likes of Centrica and EDF.
Finally there is the roll out of 5G to consider: in October it became the first company in the UK to carry full 5G over a commercial network. Live mobile traffic started when it switched on its 5G site in Manchester which connects to Vodafone’s converged national fibre network.
Vodafone is not standing still as a business; it is tapping into some of the technology which is going to change the ways we live our lives in the next decade and is a leader in its field. It is globally diversified and partners with many of leading brands and firms on the planet.
Some investors will have been holding Vodafone faithfully for years and collecting their dividends, but it is now looking a lot cheaper and has considerable upside growth potential.