I am still on alert for a larger pullback in the market. The larger picture suggests the SPX will li...
Vodafone Calls on Project Spring
01/05/2016 10:00 am EST
With the new year starting, we’re rounding up our favorite picks for 2016. This stock is at the top of our list; we believe it has some of the best potential in the telecom industry, explains Benjamin Shepherd, editor of Global Income Edge.
One of the most attractive aspects of Vodafone (VOD)—aside from its 5.4% yield—is it’s easily one of—if not the—most geographically diversified telecoms in the world.
Its operations span 26 countries, ranging from the developed markets of Europe to emerging markets in Africa and more in-between countries such as India.
It also partners with mobile operators in 50 more countries, serving about 450 million customers worldwide with mobile phone and broadband services among a growing menu of options. Its largest markets are Germany, the United Kingdom, Italy, and Spain.
The telecom has also been reinvesting some of the proceeds from the sale of its stake in Verizon Wireless into upgrading its network and expanding its service offerings.
Much of that is going towards Project Spring, Vodafone’s effort to upgrade its network quality throughout Europe.
The telecom is working to expand 4G and broadband coverage across Europe to boost data usage, while also expanding its 3G coverage in its Africa, Middle East, and Asia Pacific markets.
It has also allowed for the rollout of Vodafone RED, a 4G service plan that offers international voice and text service, as well as access to music streaming service Spotify or Sky Sports Mobile TV from smartphones.
In addition to Project Spring, another catalyst is Europe’s potential recovery. That’s largely because smartphones are surprisingly uncommon in Europe. While the devices have a 75% penetration rate here in the US, it is only 48% in Europe, which is up from 33% two years ago.
The consensus five-year growth forecast for Vodafone’s earnings is 8.5%, which seems to be pricing in a sluggish European economy. That still leaves plenty of room for dividend growth over the next few years though.
With a fruitful capital expenditures program coming to an end and solid growth potential ahead, Vodafone is still a #1 Best Buy.
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