Why I Like Vodafone

LONDON -- As the New Year begins, I have been looking for new shares to buy -- and one that has caught my eye is Vodafone (LSE: VOD  ) (NASDAQ: VOD  ) . So for the rest of the year, I will be following the company's performance and conducting further research into its news and results.

Mobile phones have almost become a necessity in this day and age, acting as cameras and portable devices to connect to the Internet -- and not forgetting the telephone function itself! Whereas previously they were a luxury, telecommunications companies are now widely considered as defensive shares, along with the likes of supermarkets and pharmaceuticals -- providers of products and services that people need in times of austerity and prosperity alike.

Now, I already own shares in Vodafone, and I'll tell you why. The global telecommunications company is one of the highest yielders in the FTSE 100 at more than 6%, so automatically I'm making my money work for me by receiving juicy dividends from my shareholding.

I have also recently switched mobile-phone contracts to one on Vodafone. I, for one, like the notion that the money I spend on my calls is ploughing its way into Vodafone's profits, and the better the company does, then the more likely my shareholding increases in value.

In fact, as I was writing this article, I received a text message from Vodafone informing me that for the next three months, I can browse, download, or email as much as I want, and there will be no additional costs if I go over my price plan's U.K. data allowance. Toward the end of the three-month offer, the company will text me to let me know if I have exceeded my data allowance and give me the option to add a higher allowance to my plan. It's little examples of good customer service such as this that add up and enhance the company's reputation.

No investment is without its risk, though, and Vodafone is currently embroiled in a potential $2 billion tax dispute with officials in India. Talks are planned very soon, however, in an attempt to resolve the matter. Once a verdict is reached, I believe the shares will regain some of the value they have lost as investors remained in the dark about the outcome.

But it's this exposure to India, as well as other emerging markets, that endears me to Vodafone: With an increasingly affluent middle class emerging from these parts of the world, having a foothold there is important for the company's dominance in the sector. And with decent prospects for expansion, that means my investment is more likely to grow.

Furthermore, Vodafone owns a 45% share of Verizon Wireless, which is owned by Verizon Communications and is the biggest mobile group in the United States. This means Vodafone collects a percentage of Verizon Wireless' revenue; and not only that, but Verizon Wireless has also taken to paying out big dividends. 

In recent years, Vodafone has paid out a special dividend to shareholders with this extra cash injection, although in November the company reported that this time it would put the cash toward a 1.5 billion pound share buyback program. This will reduce the number of shares in issue, meaning the company could pay higher dividends in the future.

With the interim dividend due to be paid into my account on Feb. 3, I remain a happy Vodafone customer and investor, and I'll be keeping an eye on further news on the company to see if I can be tempted to top up my stake.

I'm not alone in liking Vodafone as an investment. City super-investor Neil Woodford owns a significant holding of the company within his high-yield portfolios, and his track record speaks for itself, having bested the FTSE 100 by 200%-plus during the 15 years to October 2012 by identifying large-cap winners on a regular basis. The Motley Fool has produced a special report on the eight blue-chip companies favored by Woodford, now updated for 2013. It's completely free but available only for a limited time, so just click here to have it delivered instantly to your inbox.

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  • Report this Comment On January 17, 2013, at 4:18 AM, popsranola wrote:

    Vodafone the pensioner Cash Cow and a good paying Dividends for Investor....a real Cash cow and the growth iN CAPITAL IS CERTAIN..........SLEEP WELL .......AND YOUR INVESTMENT IS SAFE WITH VODAFONE........AND YOUR CAPITAL WILL CERTAINLY GROW WITH VODAFONE.......VODAFONE THE GREAT SANTA CLAUSE..............

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