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Income: should you hang up on Vodafone
Markets
by James Phillipps on Feb 18, 2013 at 10:08
The fact it is so widely held is little surprise given it is a chunky 5.1% of the FTSE 100 index and the fourth largest stock by market capitalisation.
Paying a healthy dividend yield of 5.67%, it has long been a sector stalwart, including in Woodford’s Income and High Income funds until last week.
Positive trends
Artemis’s Adrian Frost, Jupiter’s Tony Nutt and M&G’s Alex Odd are among the well-known managers with significant positions in the telecom firm and PSigma Income manager Bill Mott is another fan with a 5.9% overweight holding.
‘Our main theme here is the positive trends towards increased use of bandwidth in the internet age and the explosion in data usage, but we also think that these areas will prove to be relatively robust in a high inflation/low growth scenario,’ Mott says.
‘We believe that we have got to the stage where people regard their mobile phone as an everyday essential.’
Analyst consensus backs this view with 28 out of 32 analysts tracked by Reuters rating the company either hold, outperform or a buy and just one rating Vodafone a sell.
But that said, the number saying it is a buy has almost halved from three months ago, dropping from 11 to six, over which time the share price has risen by only 2.5%.
Whether Woodford’s call proves right remains to be seen, but one thing that is certain is that his investable universe keeps on shrinking.
He sold out of the utilities sector, which makes up 3.9% of the FTSE 100, completely in 2011 citing regulatory risk and his latest call means there is almost a tenth of the market that he will not touch with his £21 billion Income and High Income funds.
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