Vodafone share price falls as dividend is slashed

Vodafone has cut its dividend, news, that to some, will have come as no surprise. With the 16-month decline in its share price the dividend pay-out had, most recently, represented a near 10% yield.

Vodafone dividend cut accompanied by €7.6 billion loss

This body blow to Vodafone investors was accompanied by news that Vodafone had also swung to a full-year loss, brought about, in part, by a financial transaction in India and a cut in the value of investments in Spain and Romania. This loss amounted to €7.6 billion, compared to a profit in the same period last year of €2.8 billion.

So why has Vodafone decided that it had to reduce payments to shareholders? First, with that elevated rate of dividend, it had long been considered as unlikely that the board would keep the payments in place. Secondly, the company feels that the ‘rebased dividend [would help] to rebuild financial headroom’ meaning that the money would be re-directed to help pay down debt and carry the company forward into a 5G world.

5G costs begin to bite for Vodafone

On the 5G side, in a separate announcement, Vodafone confirmed that the company will be delivering a 5G service across seven cities in the UK on 3 July, with another 12 cities to follow by the end of the year. Indicating that it is launching Europe’s largest 5G network enabling ten times faster downloads and undertake a network for smart cities, all at a tenth of the cost of existing capabilities. Nick Read, group chief executive of Vodafone, said the company was at a 'key point of transformation'.

It's been a mixed reaction on the day for Vodafone stock, however, by mid-afternoon shares were trading down 2.7% with a share price not having been seen since May 2010.