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Top funds with the most to gain from Vodafone's bonanza
Do you invest in a fund holding Vodafone, the mobile phone giant returning £54 billion to shareholders? Check our list to find out.
Vodafone and Verizon have announced the terms by which the UK mobile group will sell its 45% stake in Verizon Wireless to its US joint venture partner. Below we identify the funds with the most to gain from the deal.
The $130 billion (£84 billion) transaction will be the third biggest corporate deal in history. There is much excitement over how much of this staggering windfall will be in cash and how much Vodafone (VOD.L) chief executive Vittorio Colao (pictured) will pass to his shareholders. Even if Vodafone goes on an acquisition spree in Europe, Colao will be left with a cash mountain that should rightfully go back to investors.
Before the news was announced stock broker Hargreaves Lansdown reckoned Vodafone could pay as much as £40 billion to shareholders, or 83p per share. Its current share price is 213p, up nearly 7p or 3.3% today on speculation that the mobile giant could become a bid target once it exits the US.
However, Vodafone has a mixed history on dividends. Although it is one of the biggest dividend payers in the UK and currently yields an attractive 5.5% income, it disappointed investors by using the last big dividend from Verizon to buy back its own shares (the previous payment from the US company had led to a special dividend in 2011). This is one reason why fund managers at Invesco Perpetual, including Neil Woodford, sold the stock earlier this year.
Roger Lawson of investor action group ShareSoc says Vodafone could have upped its dividends by 25% if it had not spent the money on share buybacks. Like many investors, Lawson dislikes buybacks as an indirect way of returning cash that are more about massaging earnings per share figures, and therefore help directors secure bonuses.
Nevertheless, Vodafone has been a popular stock with fund managers. Below we list 30 funds that have disclosed holdings in Vodafone.
The first table, compiled by Hargreaves Lansdown, shows the 10 unit trusts (or open-ended investment companies) with the biggest exposure to the Berkshire-based company.
In the second table we've listed the 20 investment trusts (or investment companies) with the biggest bets on Vodafone that we can see from stock market announcements.
|Top 10 unit trusts with biggest Vodafone stakes|
|Legal & General Ethical||9.68%|
|Scottish Widows UK All Share Tracker||9.63%|
|Fidelity Funds - Global Telecoms||9.40%|
|RWC Income Opportunities||8.35%|
|UBS UK Equity Income||7.44%|
|JPM UK Managed Equity||6.64%|
|Elite Charteris Premium Income||6.61%|
|Standard Life Investments UK Equity High Income||6.61%|
|Psigma UK Growth||6.58%|
Source: Hargreaves Lansdown, Lipper
The interesting thing about these unit trusts is they are all keen on Vodafone, holding more than the 6% weighting in the FTSE All Share that the stock represents.
However, with the exception of Legal & General Ethical, which is managed by Citywire A-rated Jason Forster, and RWC Income Opportunities, these are not terribly impressive funds. Most of them have three-year returns that are middling at best. That said, a boost from Vodafone may help matters.
More interesting are the investment trusts...
|Top 20 investment trusts in Vodafone|
|Schroder Income Growth||6.40%||31-May|
|Jupiter Dividend & Growth||5.66%||30-Jun|
|BlackRock Income and Growth||5.50%||30-Jun|
|JPMorgan Income & Capital||5.30%||31-Jul|
|Dunedin Income Growth||5.10%||31-Jul|
|JPMorgan Elect Managed Income||4.90%||31-Jul|
|City of London||4.80%||31-Jul|
|Henderson High Income||4.50%||31-Jul|
|Value & Income||3.84%||30-Jun|
|Standard Life Equity Income||3.80%||31-Jul|
|Troy Income & Growth||3.60%||30-Jun|
|F&C Capital and Income||3.40%||31-Jul|
Source: company fact sheets and stock market announcements
Although only the top two of our list are 'overweight' Vodafone (ie, have more than the 6% index level) they are generally a better bunch of funds than the unit trusts, particularly over five years (although Majedie Investments, still nursing losses from the financial crisis and BlackRock Income and Growth, bottom of its sector, are exceptions).
Half of the investment companies in this table are in the UK Growth & Income sector. Of these I would highlight Temple Bar. Managed by Alastair Mundy of Investec Asset Management, it is second in the sector over five years with a five-year total shareholder return of 128%. The fact Mundy has over 7% of the fund in Vodafone may have as much to do with him struggling to find more interesting companies in which to invest as with the telecom's valuation. I'd also point out Merchants, a high yielding investment trust with a secure dividend which we tipped in the latest issue of our ezine Investment Trust Insider.
Elsewhere, Bankers, a solid trust that invests internationally, has not been a big fan of Vodafone with 1.6% of the fund in the stock. As a global growth trust it is not so focused on higher yielding shares. Managed by Alex Crooke it has beaten the FTSE World index return of 47.9% with a five-year total shareholder return of 63%, ranking it ninth out of 24 trusts in its sector.
More about this:
Look up the funds
- Legal & General Ethical R Inc
- Scottish Widows UK All Share Tracker I Acc
- Fidelity Funds - Global Telecoms A-GBP
- RWC Income Opportunities A GBP
- UBS UK Equity Income A Net Acc
- Waverton UK A GBP
- JPM UK Managed Equity A Acc
- Elite Charteris Premium Income I Inc
- Standard Life Inv UK Equity High Income Ret Inc
- PSigma UK Growth Inc
Look up the shares
Look up the investment trusts
- Temple Bar (Ordinary Share)
- Schroder Income Growth (Ordinary Share)
- Jupiter Dividend & Growth Comm (Common Stock)
- BlackRock Income and Growth (Ordinary Share)
- JPMorgan Claverhouse (Ordinary Share)
- JPMorgan Income & Capital (Ord Income)
- Dunedin Income Growth (Ordinary Share)
- JPMorgan Elect Managed Inc (Ordinary Share)
- City of London (Ordinary Share)
- Murray Income Trust (Ordinary Share)
- Value & Income (Ordinary Share)
- Standard Life Equity Income (Ordinary Share)
- Merchants Trust (Ordinary Share)
- Shires Income (Ordinary Share)
- Troy Income & Growth (Ordinary Share)
- Brunner (Ordinary Share)
- F&C Capital & Income (Ordinary Share)
- Bankers (Ordinary Share)
- Majedie Investments (Ordinary Share)
Look up the fund managers
More from us
- Investment Trust Insider: an equity income special
- £54bn payday for Vodafone shareholders
- Global Growth investment trusts
- UK Growth & Income investment trusts
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by Michelle McGagh on Dec 05, 2013 at 05:01