Vodafone (LSE: VOD) (NASDAQ: VOD.US)is one of the largest companies in the FTSE 100 and many private investors have differing opinions on the bank and its prospects.
So heres a quick rundown of the key reasons why you may wish to buy, sell or simply hold on to the companys stock.
Buy
First and foremost: the dividend. Vodafone currently pays out a 5.4% yield, ranking it up there among the best of the FTSEs high yielders. With a raft of other dividend-paying stocks slashing their payouts recently think Tesco and De La Rue, while the smart money is on Morrisons yield to be chopped sooner rather than later Vodafones dividends seem more safe than some of its fellow income stock brethren, and is substantially above the FTSE 100 average of 3.5%.
Whats more, its pulling in a net profit margin of 30% despite tricky headwinds following market saturation. In order to combat these, Vodafone is pushing ahead with its Project Spring programme, which aims to update its entire European network in order to put it head and shoulders above its competitors.
Hold
Ah, yes, Project Spring. Its a ballsy move, one thats costing the company 19bn, and management expectsit will bring in an extra 1bn in free cash flow per year but not until 2019. A long-term play, then, but Vodafone has never been a stock to make a quick buck on, to borrow a phrase from our US cousins: often moving in line with the Footsie, the telecoms company is roughly flat compared to its share price of 18 months ago, when rumours surfaced and were substantiated that Verizon Communications was looking to take full control of their joint venture, Verizon Wireless.
Sell
Which leads us nicely onto a possible reason to sell. Wireless was a cash cow for Vodafone, which management more often than not decided to return to shareholders in the form of special dividends. Without this, and returning to our earlier observation that Vodafone has a large exposure to slowly recovering Europe, its near-term prospects arent encouraging. These issues have been reflected in company update after company update, offset by management talking up Project Spring, the amount of faith in which bringing to mind the phrasea wing and a prayer to me.
What now?
Of course, what action to take on Vodafoneis something only you can decide. But the Motley Fool’s top analysts believe thatonly a handful of companies will actually make big gains this year, so I highly recommend that you readtheir brand-new report intoWhere We Believe The Smart Money Is Going In 2014.
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Sam does not own shares in Vodafone.
