Tuesday, March 6, 2012

Stock Bought: VOD

For my second purchase today I bought shares of Vodafone Group (VOD), a multinational telecommunications company headquartered in the United Kingdom. I particularly like Vodafone's international presence, which I think gives it plenty of opportunities for growth. This purchase complements my position in AT&T (T), giving me some diversification in the telecom industry.

VOD is a good dividend-growth stock. The company has increased its dividend for 12 consecutive years and has stated that its goal is to achieve dividend growth near 7%. The 5-year average annual dividend growth rate is 8.0%. For readers who are curious as to why VOD does not appear as a Dividend Contender (10-24 consecutive years of dividend increases) in the Dividend Champions, Contenders, and Challengers List, it is because the preceding numbers are based on dividends paid in British pounds. Due to exchange rate fluctuations, the dividend paid in U.S. dollars was lower in 2009 compared with 2008.

Some other useful information to know is that the dividend is paid semi-annually in the form of an interim dividend and a final dividend. The most recent dividend payment included a special dividend from Verizon Wireless, which is 45% owned by Vodafone; the other 55% is owned by Verizon (VZ). However, it is unclear whether the special dividend will be a recurring payment. Due to a tax treaty between the U.S. and the U.K., there is no foreign tax withholding on dividends from VOD, which is nice.

I bought 30 shares of VOD at the price of $26.87 per share, giving me a 5.44% yield on cost. At the current dividend rate, excluding the special dividend, I can expect to receive $43.81 in annual dividend income. This purchase represents about half of my desired position in VOD. I plan to buy more shares -- assuming the price remains attractive -- once I add new capital to my brokerage account. (My three purchases this week used up almost all my cash.) This purchase makes VOD the 21st stock overall and the 3rd foreign-based stock in my portfolio.

7 comments:

  1. Man, you went all out with guns blazing today. Very nice!!

    I like VOD, and wouldn't mind doubling my 50 share position. I think for telecoms, this is a winner with its global position, 45% ownership of VZW, low debt and lack of major legacy costs due to the large wireless business. It's just solid in my opinion, and this one goes very well with T.

    I think VOD is one of the few stocks I own that is currently trading below my cost basis so this one may be one I pick up more of.

    Good buy!

    ReplyDelete
    Replies
    1. Hi Dividend Mantra,

      Yes, I had a heavy trigger-finger today. I've been waiting for VOD to dip below $27, so I took advantage of today's drop to start my position. I agree that it is a solid stock and I will probably double my position to 60 shares at some point in the near future.

      Cheers,

      Deedubs

      Delete
  2. I like VOD as well. I like their interests in VZ, Europe, and even India if I remember correctly. It's way more diversified than than VZ or T. Plus you get international exposure without withholding taxes and a great yield. The only reason I don't own this one is the semiannual dividend. I require quarterly or monthly dividends, but that is just me.

    Wow you've made a lot of purchases already this month!

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    Replies
    1. Hi Compounding Income,

      I like VOD for the same reasons you listed. Although I would prefer a quarterly dividend, I am okay with semi-annual payments.

      Yes, I have bought quite a bit in a short time this month. A similar thing happened in the second half of January, so I guess I occasionally buy in spurts. However, now that I'm low on cash, I won't be making any more purchases until I get new capital.

      Cheers,

      Deedubs

      Delete
  3. I like VOD for many of the reasons you list here and it is high on my list of stocks to add to my portfolio. I really like its global diversification and its high ownership stake in VZ Wireless, like getting two companies for the price of one.

    ReplyDelete
    Replies
    1. Hi Stoic,

      Thanks for your comment -- I agree with everything you wrote!

      Cheers,

      Deedubs

      Delete
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    ReplyDelete