Vodafone Group Plc (ADR) (VOD) is expecting $130 billion in cash and stock from Verizon Communications Inc. (VZ) early next year when Verizon buys Vodafone‘s interest, and Vodafone is looking to maintain its 5% cash dividend post-deal, says Stuart Shikiar, Chairman and Chief Investment Officer of Shikiar Asset Management Inc.
“Vodafone is based in London, and for the last 15 years it has had a 45% interest in Verizon Wireless, which is the real cash cow of Verizon, and that asset is extremely valuable — so much so that Verizon decided to buy it from Vodafone. At closing, early next year they will pay Vodafone $130 billion in cash and Verizon stock,” Shikiar said.
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Vodafone currently pays a 5% cash dividend, which Shikiar expects to continue, and as a company with a low multiple, high cash dividend and other catalysts to propel the stock higher, VOD is one of Shikiar’s larger portfolio holdings.
“The catalyst there was that we own a company in two businesses we like, technology and telecommunications. Its valuation when we purchased it was very reasonable. Vodafone pays a 5% cash dividend, which it still will post deal, and we were very happy to own it whether or not they sold Verizon Wireless, but our view was that at some point they would indeed get a deal done and that it would become an even more attractive investment. Vodafone really checked all the boxes that we look for in an important holding, in fact our third largest,” Shikiar said.