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vodafone shares
howie
Posted: 23 February 2012 07:28:41(UTC)
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i seem to get a regular notification that vodafone are buying their own shares.
can anyone explain why they are doing this and is there any reason for an investor to be concerned
colin overton
Posted: 23 February 2012 09:28:13(UTC)
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Hi Howie, I'm also a Vodaphone share holder as well. When a company buys its own shares it generally means that they think their share price is too low - don't they all. Again generally this means the share price will increase. On the down side it also means that the company can't think of a better way of spending its money (profit) and buying shares (and of course destroying them) is making the company smaller on some measures. Everyone says that Vodaphone is a well run company but its shares never seem to rise. I bought at 280 (a dip in price many years ago) so a doubling of price would be good.
1 user thanked colin overton for this post.
Christopher Matthews on 23/02/2012(UTC)
john ballinger
Posted: 23 February 2012 18:25:42(UTC)
#3

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Buying there own shares increases the dividend
Louis
Posted: 23 February 2012 19:15:05(UTC)
#4

Joined: 04/01/2012(UTC)
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Usually the main driver is that the earnings per share increase as there are less shares on issue - increasing the EPS is a major driver of executive bonuses - IBM for instance has increased its EPS year on year for the past 10 years or so by buying back $billions of shares per year. As stated above, it can also increase the dividend (if the Board chooses!)
Roger Parr
Posted: 23 February 2012 19:17:42(UTC)
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Company buy-backs are a terrible waste of shareholders' money. The only people to benefit are the company board members and their cronies, who are the large institutions. By paying dividends, all the shareholders benefit because it is a return on their investment and you cannot disguise this on a company's report. Many companies employ this practice as it distorts the earnings figure and allows the triggering of a threshold to enable the board members to reap their bonusses. It is an insidious method which is wide spread and amounts to throwing the shareholders money down the toilet.

RP
Spartacus
Posted: 23 February 2012 19:34:30(UTC)
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I'm not a great fan of buy-backs. It's a companies way of saying "We can spend your money better than", plus of course there's nothing to stop shareholders using divis to do their own micro buy backs.
David Kendal
Posted: 23 February 2012 21:57:57(UTC)
#7

Joined: 29/04/2010(UTC)
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Yes, they probably want to see the share price increased, prior to a bid for Cable & Wireless Worldwide.

It is easier for a mobile company to buy a fixed line company than the other way round.

Let's see it happen.
J Thomas
Posted: 23 February 2012 23:55:01(UTC)
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I hold vodafone shares as well and they pay a good dividend which is one of the reasons they will never gain a great deal on the share price.
However the divi pays for my mobile contract , and if you buy shares for the dividends of companies you would use anyway you dont mind paying the bills so much.
A good case in point is utilities, supermarkets, insurance companies, oil barons, etc, the only way you will ever get your money back from their exorbitant prices is through dividends.
Just remember never to take them up on their kind offer of extra shares in stead of cash, by taking the money you are insuring yourself of their financial default. If you hold shares for 18 years the compound cash on a 5% yeild will have bought the shares. If they do go bust at least you will have made your money back, what the shares are then worth is a bonus.
Many employees of RBS and Lloyds found out to their cost that accepting shares instead of cash suited the Directors and Balance Sheet very well, less so the loyal staff. ( And does anybody remember Railtrack? )
By all means invest the money from dividends elsewhere, just not in the same company.
Sinic
Posted: 24 February 2012 08:14:31(UTC)
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Colin Overton. Unless you know something I don't, you don't buy a FTSE 100 company which offers a high yield and expect it double in value in a relatively short period of time. As they say 'elephants don't fly'. I bought Vodaphone at 147p in August 2010 and it is currently around 173p. In addition it has paid substantial dividends. A good core holding in any portfolio in my opinion notwithstanding share buybacks.
DaveT
Posted: 25 February 2012 19:12:11(UTC)
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Two or three years ago Vodafone spent their (our) profits taking over other phone companies. They were eventually criticised by some shareholders, the media and the pundits. They stopped doing that and their profits became an embarrassing pile of money. They then started the share buybacks which are now also being criticised.

If they paid more of their profits as dividends the share price would probably go up because the pundits think that there is a 'proper' level that returns should be at as a percentage of the share price.

The problem with that pundit view is that we bought these shares at about 120p so the proportion of the dividend to that is already way over the level the pundits think should be right and for the poor person who bought them at 250p it is far too low.

It is stupid to compare the dividend with the current price because relatively few people actually bought them at that price.
colin overton
Posted: 26 February 2012 17:21:24(UTC)
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Dear Sinic, You don't expect your capital to almost half either over about 10 years. For a "well run" (?) company in a "boom" area to be trading 50% below their average price ~10years ago don't seem to be a good or even acceptable result.
howie
Posted: 29 February 2012 09:53:31(UTC)
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thanks for feedback
Ladders
Posted: 29 February 2012 22:42:02(UTC)
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Joined: 19/12/2011(UTC)
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I bought a number of these at ~157p last year during the wider economic dip and after receiving one dividend and a good capital gain of over 10% in the space of a few months, I sold them recently at 176p. I re-assessed my portfolio and decided I wanted a company who offered a better chance of a higher return on my capital. Don't get me wrong, the rise I saw was great and the dividend a nice bonus, but for the past few months the SP has been relatively stagnant and I feel my capital increase was simply down to good (or lucky) timing and couldn't see another 10% rise in the coming 6 months unless the Euro Zone crisis miraculously solves itself (doubtful IMO).

Vodafone have taken some hits in Spain, Greece and Portugal recently, as you'd expect, and although the tax case in India went their way which potentially freed up a few billion which they had earmarked for a unfavourable ruling, the decision has now been appealed so that is now effectively tied up again.

Instead, I put my Vodafone cash into Coastal Energy (CEO) and have now seen almost a 10% increase in a coupe of weeks on the back of a recent positive update on some oil production increases and an unexpected onshore gas field strike.

IMO it all depends on your risk appetitie, if you want a good capital increase with a slightly higher risk then look elsewhere, (there are a lot of companies who offer much better ROI prospects with not much more downside risk), but if you're happy with a minimal SP increase but a steady guaranteed dividend then Vodafone is a good bet... looks like the Verizon special dividend of last year could be a regular occurance too.

AL
Steve123
Posted: 29 February 2012 22:52:00(UTC)
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I am increasingly concerned about my Vodafone shares which have been going nowhere for over a year. While there is the dividend it is not that much and other companies have done well in the past few months. When are they ever going to get going or as a 'defensive' are we mean to wait for ever. I am selling 50% and see how the rest goes over the next couple of weeks. Prehaps I should sell all of it now?
Antony
Posted: 29 February 2012 22:58:09(UTC)
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A very different risk profile between COE and VOD...(!)

I am unconcerned with the recent VOD relative underperformance. Makes buying more shares even more attractive at these levels. The stock has declined, in my view, for a couple of reasons: the re-emergence of the Indian tax issue (appeal by Indian Govt), and the fact that VOD is a defensive name and has paid out its large special dividend recently. The same is expected now that EZJ has gone ex-div bearing in mind the special dividend there too.

All in all, the CEO appears to be trying to create 'value' by shedding non-core assets and focusing the business more on its core assets. I admire that and wish more CEOs did the same. I believe this is a temporary malaise, but could be proved wrong...it is a defensive name which has recently paid a large dividend and those who were waiting to sell have now done so.

Ladders
Posted: 29 February 2012 23:38:27(UTC)
#16

Joined: 19/12/2011(UTC)
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Antony;14147 wrote:
A very different risk profile between COE and VOD...(!)


I'm not so sure the difference is as great as many think...
With the economy and the euro zone in their current dire straights, ANY share (defensive FTSE100 company or not) can take a big hit on the back of bad results or a profit warning, just look at Tesco recently for a prime example.

Yes, CEO and oil stocks in general are traditionally more risky, but a lot of them are also massively undervalued as they took a kicking in 2011 and if you do your research to find companies who are currently producing in large regular and reliable quantities and have proven oil reserves, then there are limited downside risks. Obviously cash flow and funding as well as any levels of debt are also key things to keep a clear eye on.
On top of this, especially with the likes of CEO, you have huge upside as they are currently drilling ambitious but relatively low risk exploration wells in Bua Ban South which could nearly double their production levels by the end of the year.

As always DYOR and this is not a recommendation to buy, but from my experiences some of the more traditional risky plays (carefully selected of course) are not looking so risky in light of the more defensive shares looking decidedly riskier by the day.

AL
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