Stock of the Week: Vodafone
This week’s share of the week is Vodafone as the group demonstrated a reassuring performance in its half year results last week. After a poor share price performance since the start of the year, the group provided a solid set of results which sent the shares up 7% on the morning of the announcement.
As expected it reported lower group revenues and a reported loss of €7.8bn (which was significantly lower compared to last year) as a result of asset impairments and the loss on disposal of various businesses, mainly Vodafone India, while there were also foreign exchange headwinds. There were higher levels of competition in Italy and Spain during the period however, investors should appreciate that there were also many encouraging figures and overall they were better than the market had anticipated. Investors were clearly relieved judging by the recovery in the shares on the day.
One of the main drivers for the rally in the shares is more than likely explained by the fact that the dividend was maintained despite fears that it might be chopped given the reported losses and the tough trading conditions faced by the group in some regions.
With the yield currently in excess of 8% and the shares relatively low we take the view that they are attractive priced for income-seeking investors taking a contrarian approach and looking for a low to medium level of risk.