Thursday 3 October 2013

Many a Slip...(Portfolio Sale: Vodafone)

As the old English proverb goes: There's many a slip 'twixt cup and lip - or in the more modern idiom, 'it ain't over until the [large] lady sings'.

Well, in this case the lady in question would be Verizon Wireless; the cup more than half full is Vodafone Group (LSE:VOD).

Call me a worrier but when a deal seems to be too good to be true, I do begin to have my doubts.

Don't get me wrong; when I bought Vodafone shares in January 2013 - it was specifically in the expectation of the sale of its Verizon Wireless shareholding. What puzzled me was the combination of the attractive dividend plus this potential windfall - implying that the market didn't think much of Vodafone or the potential sale.

Vodafone is of course one of the perennial high-yield dividend shares - almost a 'must-have' for any income portfolio. I already took some profits on my holding in November 2011 at £1.77 but then jumped back in January 2013 at £1.65: not too bad a call in retrospect.

Today the price has spiked upwards, breaking through my 'sell' barrier (capital gain > 5 years' dividend income) and nets a 33% profit. So, after some hesitation - as the yield is still attractive - and facing up to my mental biases, I have sold up. The downside of any glitch in the Verizon sale could be messy and we mis-programmed humans put more value on potential losses than potential gains (rather than valuing them equally). What are you going to do? I just try to delay the urge to sell...

I wouldn't blame you for holding on to your VOD shares (assuming you are lucky enough to be holding some). Some income-oriented dividend-share strategies are based on a 'buy and forget' approach: for example, Stephen Bland's HYP approach, which pointed me in this income-investing direction in the first place. However, I think that misses a key fact about high-yield shares: they are out-of-favour because of some risk element perceived by the wider market (in fact a species of 'value' share). Personally, I don't think that the market gets it wrong for a sustained period and - sometimes - it is possible to profit from the market's temporary distaste for a share or fixed-income security.

Having sold, my mental tension is reduced. But the bigger problem is now: what on earth to buy?

(Answers on a digital postcard, please.)

[Sale price: £2.21]

I am not a financial adviser and the information provided does not constitute financial advice. You should always do your own research on top of what you learn here to ensure that it's right for your specific circumstances.


  1. What about the Royal Mail IPO? I understand that a dividend of 6-7% is being suggested - dependant on the eventual price.

    1. Good idea. I hesitated a lot but finally decided to go for it.

  2. how about admiral 7%+ dividend? or am I missing something, (probably)

    1. Digital Look is showing that this forecast 7.6% comes with a forecast dividend cover of only 1.1 This looks like a dividend cut waiting to happen. so I'd look for something safer...

  3. The sale of Verizon Wireless will make VOD very European market centric. I'm wondering if this could make VOD a target for somebody like AT&T. Therefore could we be in line for another share price uplift once the Verizon dust has settled?

    Disclosure: I currently hold VOD in my HYP.

  4. I am currently holding VOD, in fact it was the first share I ever purchased just over a year ago - I've seen around a 30% rise and much like yourself this kind of rise does make me re-evaluate and whether to take the profits or not. At the moment, I plan on holding as I still feel that Vodafone are in a market that has a lot of growth left in it and the dividend is still good enough for me to stay.