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.