?21 Jun 2018 11:45
I believe that those seeking big dividend payers with excellent exposure to emerging markets would be much better served by investing in Vodafone Group (LSE: VOD).
The communications giant saw organic service revenues in its Africa, Middle East and Asia Pacific (AMAP) territory boom 9.4% during the 12 months to March, even in spite of tough conditions in India where tough competition pushed sales 18.7% lower on a comparable basis.
However, Vodafone is doubling-down in this bright growth market to turn around its fortunes. The merger of Vodafone India and local operator Idea Cellular, the sign-off for which is expected any day now, will mark the first stage of a fightback against new entrants in the market by creating the country's largest mobile services provider.
Moreover, in a separate transaction, Vodafone in April agreed to the merger of Indus Towers and Bharti Infratel in a move that gives it a stake in the nation's largest listed tower operator.
But Vodafone is not only a great play on far-flung emerging markets, as evidenced by its acquisition of some of Liberty Global's assets last month. As well as boosting its foothold in Germany, the move also transforms the Footsie firm's position in Central and Eastern Europe, and more specifically the Czech Republic, Hungary and Romania. It is estimated that the deal will allow Vodafone to reach 6.4m homes and 15.8m cellphone users.
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Now Vodafone is expected to endure a little earnings trouble in the near term, a 5% decline forecast for the current fiscal year by the City.
A 16% bounceback is predicted for the following period, though, and this does not seem an outlandish estimate by any means. After all, robust economic conditions in Europe, allied with a slew of fresh measures to bulk up its market share, should supplement strong revenues growth in its core operational heartlands (organic service revenues in its local continent rose 3% last year).
This bright long-term earnings picture, allied with resplendent cash flows, is expected to keep the dividend stable around the 15.07 euro-cents-per-share marker through to the close of fiscal 2020. And as a consequence, Vodafone offers up a stunning 7% yield through this period.
It may be expensive, but I believe Vodafone's brilliant growth prospects across the world make it worthy of a prospective P/E rating of 19.6 times.
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