Here is the Vodafone share price prediction until 2027

vodafone (LSE: VOD) share price has fallen again, falling 55% in the last five years.

This is despite the telecommunications giant’s transformation plan. And 500 million euros worth of shares buyback The decision announced on November 14 did not have the impact I thought it would on Vodafone shares. At least not yet.

What needs to happen for the share price to start rising again?

The road to growth

Let’s remind ourselves what the company’s new focus is:

To regain our competitiveness, we will simplify our organization by eliminating complexity. We will reallocate our resources to deliver the quality service our customers expect and deliver further growth from Vodafone Business’ unique position. — CEO Margherita Della Valle, May 2023

This includes cutting the dividend in half. And I wonder if this sends mixed messages.

The cash is not there to continue paying the previous large dividends. But is there suddenly enough money left to spend €500 million to buy back shares?

Common sense

I can understand why investors might be confused. But I think it’s a logical move.

I like the companies I own to pay growing dividends backed by earnings coverage, but Vodafone’s didn’t. And then paying the reserve cash out as buybacks, which can help avoid setting dividend expectations that earnings can’t support.

Perhaps fears of further dividend cuts are also helping to pull the price back.

This has happened before; It was not enough for a company to reduce costs in the first stage, and pruning shears re-emerged.

Appearance

Despite the cut, there is still a rate of 6.7% dividend yield on the cards. And when I look at the dividend predictions and I like what I see in the projected earnings ratio.

Analysts expect the dividend to remain stable until at least 2027, which seems fair enough to me. Since earnings per share (EPS) are predicted to rise, we could see the dividend increase to 1.6x this year and 2.1x in 2027.

The problem is that I suspect many investors will want to see real earnings growth before believing the new dividend plan will work. This includes me.

Is profit on track?

It’s difficult to read this year’s first half results as we compare them to the loss per share reported in the first half of last year. Vodafone evaluated corrected The EPS figure is ahead by 30%.

This is a good start, but we may have to wait until FY 2025 results to properly address the recovery. But the third quarter update in February may provide clues.

So what will happen to the share price? Brokers’ average target for the shares is 91p, an increase of just 28% from the price at the time of writing. This level could mean a price-to-earnings ratio of just 9, based on 2027 forecasts.

One for dividend investors?

Right now I think Vodafone should be of most interest to income investors and should be followed. It’s definitely on my watch list for sustainable dividend candidates.

I don’t know yet whether the promises of the rescue plan will translate into cash.