Favourite Vodafone (LSE: VOD) might finally be ready to recover. Based on the steady-as-she-goes performance of the share price since then, it would seem I wasn’t alone in thinking this.
Notwithstanding the potential for any macro issues to upset the markets, today’s trading update leads me to think recent momentum should continue over 2020.
“Good progress”
Group revenue rose 6.8% to €11.8bn over the three months to the end of 2019 thanks to a stellar performance in what remains a “challenging” European market (up 10.1% to a little under €9bn). That said, revenue from elsewhere declined 2.7% to €2.5bn.
Based on this performance, Vodafone chose to reiterate its guidance of adjusted earnings of €14.8bn-€15bn, and free cash flow of around €5.4bn for the full year.
Away from the numbers, the company also reported making “good progress” on its strategic priorities over the period, including the appointment of a senior management team for its soon-to-be-listed towers business (European TowerCo). CEO Nick Read hinted that shares of this spin-off should hit the market in “early 2021.“
Solid ‘hold’
Vodafone’s shares were up slightly this morning, suggesting investors were satisfied with what the company had managed to achieve. Then again, most aren’t invested for capital gains — it’s the dividends they’re after.
Assuming it returns the 7.9p per share currently penciled in by analysts, Vodafone yields 5.2% at its current price — far more than the 1.3% you’d receive from even the highest-paying Cash ISA.
Taking this, today’s update, and the fact that the £40bn-cap is finally trying to tackle its serious debt burden by selling assets into account, I think the stock now looks a solid ‘hold’ for those looking to generate a second income stream from their portfolio.
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