VOD 9.06 (-0.11%)
US92857W3088Telecommunication ServicesTelecom Services

Last update on 2024-06-28

Vodafone Group (VOD) - Dividend Analysis (Final Score: 6/8)

Explore Vodafone Group's (VOD) dividend performance and stability with a detailed 8-criteria analysis, achieving a final score of 6/8. Understand dividend yields, growth, and sustainability.

Knowledge hint:
The dividend analysis assesses the performance and stability of Vodafone Group (VOD) dividend policy using a 8-criteria scoring system.
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Short Analysis - Dividend Score: 6

We're running Vodafone Group (VOD) against the 8-criteria scoring system to evaluate the performance and stability of a company's dividend policy.

Criteria
Dividend Yield Higher than the Industry Average?
1
Average annual Growth Rate higher than 5% in the last 20 years?
1
Average annual Payout Ratio lower than 65% in the last 20 years?
0
Dividends Well Covered by Earnings?
1
Dividends Well Covered by Cash Flow?
1
Stable Dividends Since the Company Began Paying Dividends?
0
Dividends Paid for Over 25 Years?
1
Reliable Stock Repurchases Over the Past 20 Years?
1

For those who are interested in delving deeper into the specifics, the subsequent section provides a comprehensive exploration of the criteria.

Dividend Yield Higher than the Industry Average?

Dividend yield indicates how much a company pays out in dividends each year relative to its stock price. It's an important measure for identifying how much income in percentage terms an investor is getting from an investment. Higher yields can indicate a good return on investment, but if too high, it may also signal potential risk or financial trouble within the company.

Historical Dividend Yield of Vodafone Group (VOD) in comparison to the industry average

For Vodafone Group (VOD), the current dividend yield is 12.3276%, adequately higher than the industry average of 3.56%. This trend can be both good and bad. Initially, this elevated yield suggests that the stock offers a significant return about its price, making it attractive to income-focused investors. However, the sustainability of this yield is questionable given VOD's declining stock price from 29.1714 in 2003 to 8.7 in 2023. Despite the high dividend payouts such as 0.969 per share in 2023, the declining stock price hints at potential challenges or market pessimism about the company’s future growth. Therefore, while high dividends can be compelling, they require a closer examination of the company’s financial health and future outlook.

Average annual Growth Rate higher than 5% in the last 20 years?

The Dividend Growth Rate refers to the annualized percentage rate of growth that a particular stock's dividend undergoes over a period of time, typically years. It shows the integrity of the company's financial health and commitment to sharing profits with shareholders. A growth rate higher than 5% over 20 years would generally be indicative of a company that is consistently growing and financially sound.

Dividend Growth Rate of Vodafone Group (VOD)

The dividend growth rate for Vodafone over the last 20 years is somewhat inconsistent, with some years showing negative growth rates such as -27.0556 in 2012 and -45.6755 in 2019. The average dividend ratio over this period is 9.6512%, suggesting an overall positive trend. However, given the fluctuations, particularly significant negative values in some years, it raises questions about Vodafone's consistency in sustaining its dividend payments. While the average growth rate is above the 5% threshold, the volatility makes the trend somewhat unreliable. Future investment decisions should consider this inconsistency.

Average annual Payout Ratio lower than 65% in the last 20 years?

The payout ratio represents the proportion of earnings a company pays to its shareholders in the form of dividends. A payout ratio lower than 65% is considered sustainable and indicates that the company is retaining enough earnings to support growth and operations.

Dividends Payout Ratio of Vodafone Group (VOD)

Vodafone Group (VOD)'s payout ratio over the last 20 years has been highly inconsistent and significantly above the threshold of 65%. The average payout ratio stands at 299.26%, which is substantially higher than the 65% mark. Especially, years like 2021 show an astronomical payout ratio of 5341.71%, indicating that the company paid dividends far exceeding its earnings, likely drawing from reserves or incurring debt. Negative payout ratios, as seen in several years (e.g., 2008, 2016, 2019, 2020), suggest that Vodafone incurred net losses in those periods. This inconsistency in payout ratios is concerning as it suggests potential financial instability and questionable sustainability of dividend payments. Investors should be cautious as this trend is decidedly negative from a dividend sustainability perspective.

Dividends Well Covered by Earnings?

Dividends are well covered by the earnings. This criterion checks if a company's earnings per share (EPS) are sufficient to cover the dividend payments per share (DPS). A higher EPS compared to DPS is generally a positive indicator of a sustainable dividend payout.

Historical coverage of Dividends by Earnings of Vodafone Group (VOD)

Vodafone Group (VOD) has experienced significant fluctuations in its EPS over the years, with multiple years of negative earnings (e.g., 2006 at -10.5245 and 2019 at -2.9051) and inconsistent positive earnings (e.g., 2014 at 26.8768 and 2023 at 4.2767). The dividend payout ratio, defined as the DPS divided by EPS, will give us insight into how well the dividends are covered by earnings. In 2014, the company's DPS was well covered with an EPS of 26.8768 and DPS of 2.311, resulting in a payout ratio of approximately 8.70, indicating that earnings were more than sufficient to cover the dividends. However, several years had negative payout ratios, including 2006 (-0.11) and 2019 (-0.33), indicating the company paid dividends despite negative earnings. This is unsustainable over the long term and generally a negative indicator. The payout ratio sharply turned positive in 2021 (approximately 53.4) as EPS became positive but was just enough to cover the dividends significantly. The recent trend for 2023 showing a payout ratio of 0.23 indicates a return to а more sustainable level, which is positive. Overall, the inconsistency in earnings coverage indicates volatility and poses some risks. Therefore, monitoring future earnings stability and payout ratios will be crucial for evaluating the sustainability of Vodafone Group's dividend policy.

Dividends Well Covered by Cash Flow?

Evaluating whether the dividends are well covered by cash flow involves looking at whether the company's free cash flow is sufficient to cover the dividend payments. It's fundamental as it shows how sustainable a company's dividend payout is without requiring external financing.

Historical coverage of Dividends by Cashflow of Vodafone Group (VOD)

Examining Vodafone Group's free cash flow over the years from 2003 to 2023, it is seen that the dividend coverage ratios vary significantly, ranging from highly positive figures to negative values, indicating inconsistent dividend coverage. Notably, during 2014 and 2016, the cash flow was insufficient to cover dividends, as seen by the negative coverage ratios of -10.23 and -2.18 respectively. This proved challenging for the company's fiscal health. In years such as 2013 and 2015, the dividends were comfortably covered (coverage ratios of 2.41 and 3.51, respectively), highlighting these were more robust periods. Recent years show ratios close to or below 1, with 2023 at 0.24, indicating only partial coverage and signaling potential issues if this trend persists. Consistent and ample coverage is vital for ensuring long-term dividend sustainability, implying that Vodafone might face challenges in maintaining its dividend policy without adjustments or improvements in free cash flow generation.

Stable Dividends Since the Company Began Paying Dividends?

A stable dividend policy, where the company does not cut its dividend per share (DPS) by more than 20% over a long period, reflects a company's reliable earning potential and shareholder commitment. It is a crucial indicator for income-seeking investors looking for predictable revenue streams.

Historical Dividends per Share of Vodafone Group (VOD)

Analyzing Vodafone Group's (VOD) dividend per share (DPS) over the past 20 years, we observe fluctuations with notable decreases, specifically in recent years. For instance, the DPS dropped from 2.311 in 2014 to 1.741 in 2015 and later from 1.769 in 2018 to 0.961 in 2019. Although these drops are significant, no single year witnessed a DPS drop of more than 20% overall. This preservation indicates a reasonable level of stability countering recessionary pressures, regulatory changes, and market dynamics, albeit with caution. Therefore, the criterion of stable dividends over the past 20 years holds generally positive, as Vodafone managed to protect its payouts within the critical threshold most of the time.

Dividends Paid for Over 25 Years?

Examining a company's ability to consistently pay dividends over a long period, such as 25 years, can be crucial as it indicates financial stability and a shareholder-friendly policy.

Historical Dividends per Share of Vodafone Group (VOD)

Vodafone Group (VOD) has demonstrated a consistent track record of paying dividends for over 25 years. Since 1998, the company's dividend per share has fluctuated but maintained an overall upward trend, peaking at 2.311 in 2014. Even though the dividends took a dip in 2021 down to 0.938 and under, showing a decline when compared to previous years, the overall trend is positive. The capacity to pay dividends consistently over this extended period underlines Vodafone's stable financial condition and a commitment to returning value to shareholders, fulfilling this criterion well. Therefore, this trend is good for this criterion.

Reliable Stock Repurchases Over the Past 20 Years?

Reliable Stock Repurchases Over the Past 20 Years

Historical Number of Shares of Vodafone Group (VOD)

Vodafone's stock repurchase activity over the past 20 years shows a notable trend. From the data, it's clear that the company has engaged in stock repurchases consistently over multiple years, specifically in 14 out of the last 20 years. The number of shares outstanding decreased significantly from approximately 3.25 billion in 2003 to around 2.77 billion in 2023. However, some years like 2017 and 2018 witnessed spikes in the number of shares, indicating new issuances or a pause in the repurchase strategy. The overall trend, with an average reduction of 0.7602% annually in share count, is positive as it indicates the company's commitment to returning value to shareholders. Nevertheless, the increasing share count in some years calls for a closer look at those periods to understand the market or internal conditions driving such moves. Overall, the trend favors a company that is focused on enhancing shareholder value, although the occasional reversals highlight the potential challenges or strategic shifts encountered.


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