Should I stay invested in Vodafone?

Q: I have held a good number of Vodafone shares for several years. What do you think the outlook for the company is like?

A: Vodafone is going through a period of intense change. In 2023, it appointed a new chief executive, Margherita Della Valle, who is keen to streamline the group’s portfolio and accelerate growth. So far, this has involved selling off its Italian and Spanish businesses, completing a huge merger with telecoms rival Three UK, and halving the dividend.

Many shareholders will have the same question as you - what happens next?

One of the main reasons investors hold Vodafone shares is the dividend. It used to be one of the most generous income stocks in the FTSE 100, boasting a dividend yield of over 10%. (For context, the FTSE 100 as a whole has an average yield of 3 %).

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In a results announcement last May, however, Vodafone announced plans to cut the dividend in half and the yield is now closer to 4%.

This was a disappointing turn of events for income investors. However, Vodafone has since committed to a progressive dividend policy, which should see payouts rise by 2.5% this year. This would mark the first dividend increase since 2018.

The decision to ‘rebase’ the dividend should also free up cash for paying off debt and buying back shares. In fact, Vodafone has just announced a €500mn buyback programme, beginning this month.

Another big consideration for investors is the outlook for the telecoms sector as a whole. Companies like Vodafone earn money by selling mobile, broadband, and TV services to consumers and businesses. Many of them own their own mobile networks (think phone masts and signal processing equipment) and fixed networks (think fibre optic cables and copper lines).

The sector enjoys steady demand, meaning revenues and cash flow is nice and predictable. There are also some good growth opportunities in Africa and the Middle East.

However, the market is very mature in Europe - where Vodafone makes most of its money - meaning there is not a lot of room for growth. Competition between telecoms firms is also intense, making it hard to hike prices.

Regulation can cause problems too - as Vodafone has discovered in its German business. In the past, thousands of German rental contracts came with Vodafone as the preset broadband and TV provider. Now, however, rules state that renters must be allowed to choose their provider.

Ultimately, Vodafone is at a crossroads. It has had a tough few years and there are still plenty of obstacles ahead, including regulation and competition. However, the company is taking big steps to try and address these challenges. It is reallocating its capital, successfully pursuing growth in Africa and selling off underperforming assets.

Following the merger of Vodafone’s domestic business with Three UK last year, the group could also benefit from enormous scale. VodafoneThree is now Britain’s biggest mobile operator, ahead of BT and Virgin Media O2.

Vodafone’s half-year results suggest things are progressing nicely. The business expects to deliver profits and cash flow ‘at the upper end’ of its guidance for 2026, helped by good performances in the UK, Turkey and Africa, and a return to top-line growth in Germany.¹

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Source:

¹ Vodafone Group H1 FY26 Results, 11 November 2025

Important information: - investors should note that the views expressed may no longer be current and may have already been acted upon. When you are thinking about investing in shares, it’s generally a good idea to consider holding them alongside other investments in a diversified portfolio of assets. Reference to specific securities should not be construed as a recommendation to buy or sell these securities and is included for the purposes of illustration only. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to one of Fidelity’s advisers or an authorised financial adviser of your choice.