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This 1 Stock Makes a Safe Bet for Income Investors

Vodafone (VOD) reported solid revenue growth in its last reported quarter despite the macroeconomic headwinds. Moreover, given its impressive history of shareholder returns in the form of dividends, we think this stock could be an ideal option for investors looking for a stable income stream. Continue reading…

Vodafone Group Public Limited Company (VOD) provides telecommunication services in Europe and worldwide. The company offers mobile services that enable customers to call, text, and access data; fixed line services, including broadband, television (TV) offerings, and voice; and convergence services under the GigaKombi and Vodafone One brands to customers.

Since the telecom industry is defensive, VOD’s business has not been affected much by the high inflation and the other headwinds. The stock has gained 0.7% year-to-date.

Nick Read, Group Chief Executive of VOD, commented, “We have executed in line with our expectations, delivered another quarter of growth in both Europe and Africa, and seen an acceleration in business growth. Whilst we are not immune to the current macroeconomic challenges, we’re on track to deliver financial results for the year in line with our guidance.”

Here is what could influence VOD’s performance:

Robust Financials

VOD’s total revenue increased 1.6% year-over-year to €11.28 billion ($11.46 billion) for the first quarter ending June 2022. Europe Consumer contract mobile ARPU grew 0.7% year-over-year, supported by higher roaming and digital services revenue.

The group service revenue excluding turkey rose 2.2% year-over-year to €9.21 billion ($9.36 billion), while its Vodafone Business - Service revenue increased 0.6% from the year-ago value to €2.56 billion ($2.60 billion).

Discounted Valuation

The stock’s 14.72X forward non-GAAP P/E is 17.3% lower than its industry average of 17.79x. Also, its trailing-12-month EV/Sales of 2.02X is 6.5% lower than its industry average of 2.16x. Its 6.52x forward EV/EBITDA is 26.6% lower than its industry average of 8.89x.

Impressive Shareholder Returns

VOD paid a semiannual dividend of $0.46 on May 8, 2022. VOD’s $0.91 annual dividend yields 6.2% at the current share price. Also, it has a four-year average dividend yield of 6.8%.

POWR Ratings Show Promise

VOD has an overall B grade, which equates to a Buy in our proprietary POWR Ratings system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories. VOD has an A grade for Growth and a B for Value and Stability. VOD’s impressive financials justify its Growth grade. The company’s lower-than-industry valuation is consistent with its Value grade. Its 0.63 beta is in sync with its Stability.

Among the 47 stocks in the A-rated Telecom – Foreign industry, VOD is ranked #22.

Beyond what I stated above, we have graded VOD for Sentiment, Quality, and Momentum. Get all VOD ratings here.

Bottom Line

VOD’s robust revenue growth reflects the company’s ability to remain resilient amid a slowing economy. The stock’s lower-than-industry valuation and dividend payments make it a solid buy for investors looking for a steady income stream.

How does Vodafone (VOD) Stack Up Against its Peers?

VOD has an overall POWR Rating of B, which equates to a Buy. Check out these other stocks within the Telecom – Foreign industry with A (Strong Buy) ratings: Telekom Austria AG (TKAGY), MTN Group Limited (MTNOY), and Internet Initiative Japan Inc. (IIJIY).

VOD shares were trading at $14.77 per share on Wednesday morning, down $0.27 (-1.80%). Year-to-date, VOD has gained 1.66%, versus a -9.48% rise in the benchmark S&P 500 index during the same period.

About the Author: Spandan Khandelwal

Spandan's is a financial journalist and investment analyst focused on the stock market. With her ability to interpret financial data, she aims to help investors evaluate the fundamentals of a company before investing.


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