What's going on?
Nothing’s certain but death and taxes – and, if you’re an investor, the Vodafone dividend (tweet this). Shares of the British-headquartered telecommunications company rose 9% on Tuesday after it assuaged fears that it might reduce its payout.
What does this mean?
Since “going public” two decades ago, Vodafone’s annual dividend (a slice of its profit that it returns to shareholders) has increased every year. But recent spending splurges on a cable TV business and European 5G spectrum left some investors worried it wouldn’t have much cash left to divvy up.
Yet despite turning in a loss for the last six months due to merging its Indian business with a rival’s (all the rage for Vodafone this year), the company expects better profit growth for the year as a whole, thanks to improving sales – and it’ll use that extra cash to pay out a dividend about the same size as last year’s.
Why should I care?
For markets: Investors breathed a sigh of relief.
Like former American industrial darling General Electric, some investors have come to rely on Vodafone’s dividends. For insurance and pension companies, the reliability of dividend payments is important in allowing them to meet their obligations to claimants and pensioners. Investors may have sold off Vodafone shares, anticipating a dividend cut under a new CEO – before buying them up again on Tuesday after hearing higher payouts in the future are on the cards.
The bigger picture: Towering above.
Vodafone’s creating a new distinct branch that’ll soon own its tower assets (the structures that ping cell signals around). If Vodafone eventually chooses to split this into a separate company, it’d make it easier for both investors who dig physical assets and those who like service-based businesses to back their chosen horses – perhaps giving both putative companies a boost.