Monday, 2 September 2013

Vodafone, I Must Be Dreaming


I’m not sure what the long-term effects will be for Verizon and Vodafone, but as a shareholder of VOD, I stand to make a lot of money very soon. Information on Vodafone’s investor relations web page says I can expect the following:

Verizon Shares Distributed to Vodafone Shareholders

$60,200,000,000 USD in VZ shares / 4,844,921,509 VOD ADRs
= $12.43 USD in VZ shares per VOD ADR

Given I own 300 shares of VOD ADRs, I’ll be receiving the equivalent of $3,729 in VZ shares (73 to 79 shares).

If I keep the shares of VZ, my forward 12-month dividends will increase by at least $154 USD.

Note: Shares outstanding was taken from www.tsx.com

Cash Distributed to Vodafone Shareholders

$23,900,000,000 USD in cash / 4,844,921,509 shares outstanding
= $4.93 USD per share

My special dividend will be 300 shares VOD ADR * $4.93 USD = $1,479.00 USD

Vodafone Intends to Increase 2014 Dividend

Vodafone intends to increase the 2014 dividend by 8%, to 11p:

0.11 GBP * 10 shares per ADR *1.54 USD per GBP – 0.03 USD ADR Fee
= $1.664 USD per ADR

This will increase my forward 12-month dividends by $34.00 USD.

Conclusion

I must be dreaming;

$32.35 per VOD ADR + $12.43 VZ share + $4.93 Special Dividend = $49.71

Dividend Increases of $34.00 and $154.00 per year = $188.00

I’d like to know how well VOD ADRs will hold up once VZ shares and the special dividend are distributed. Any thoughts?

7 comments:

  1. As you commented on my blog, our calculations ended up being very similar. Regarding where VOD and VZ shares will trade after the deal, I honestly have no idea. VOD will be doing some kind of share consolidation to avoid a massive price change, but I don't quite understand the process (it sounds a bit like a reverse stock split). I guess we'll just have to wait and see what happens...

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    1. Hey DGM, I thought there would be a $5 to $10 bounce in VOD shares since they "unlocked value". I was dead wrong. I don't understand what's up with the consolidation; it will not create value. The share price might remain the same but you'll have less shares. Big deal. Anyway, if the share price drops by $12.43 + $4.93, VOD shares would trade at $15.50 and the dividend yield would rocket to 10.9%! I'm not sure what to make of this deal anymore. As you say, time will tell.

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  2. The EPS and assets of VOD will drop after they no longer own verizon wireless. I would expect that while you receive your extra shares that VOD will drop in value.

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    1. VOD will drop in value. The question is by how much. If VOD shares drop by the value of the distribution + value of VZ shares, that would make them worth $13.16! I'm just hoping they won't drop by so much.

      It looks like people are warming up to the idea, as VOD shares have gone up since the announcement.

      Appologies for the delay in my response. I was excessively busy.

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  3. The cash and VZ shares is NICE! Will have to see what happens to the VOD shares as you guys mentioned. I don't have a stake in Vodafone, and haven't looked at closely either. I'm thinking in the end this will benefit the shareholders or else VOD wouldn't have signed off on it!

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    1. A lot of people don't like this deal, but if VOD manages decent organic growth in the years ahead, shareholders will indeed be handsomely rewarded. I'm keep my fingers crossed.

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