Vodafone –Verizon wireless dividend and emerging market growth creates 32% upside

This article is a summary of what I read online. The valuation, like those published exclusive on seeking Alpha, is not mine.

Vodafone Group Plc (ADR) - Currently trades at 26.96$
Potential Upside by Industry Estimates:  $8-$10. Including dividends, the total return could top 35%
Market Capitalization: $136B

Cash: 12.20$; Total debt: $42B

Shares Outstanding: Approximately 5B

Sector: Services; Industry: Communications Services

Main Catalyst: Potential future regular dividend from Verizon wireless, growth emerging market growth, increase in dividend yield
Trading timeline: 24 months

What does Vodafone do?

Vodafone Group Plc (Vodafone) is a mobile communications company operating across the globe providing a range of communications services. The Company offers a range of products and services, including voice, messaging, data and fixed-line solutions and devices to assist customers in meeting their total communications needs. Vodafone has a global presence, with equity interests in over 30 countries and over 40 partner markets worldwide. It operates in three geographic regions: Europe, Africa and Central Europe; Asia Pacific, and the Middle East, and has an investment in Verizon Wireless in the United States. In October 2010, Vodafone Global Enterprise, the business within Vodafone, announced the acquisition of two telecom expense management (TEM) companies, Quickcomm and TnT Expense Management. In November 2011, the Company sold 24.4% interest in Polkomtel in Poland.

Story:

Despite a defensive profile that should serve investors well in volatile markets, shares of British mobile-network operator Vodafone have been weighed down with the negativity that has burdened many European stocks as the sovereign-debt crisis rolls on.

Potential Catalyst:

·         Vodafone (VOD) received its best news in years on July 28—the announcement of a 2012 $4.5 billion special dividend from Verizon Wireless, of which it owns 45%—its stock  has risen 4%. But over the past 12 months, it's underperformed the market slightly. It's also badly trailed shares of Verizon (VZ), which owns the other 55% of Verizon Wireless—even though the mobile-communications outfit is each company's most important asset.

·         The decision by Verizon Wireless (VZW) to pay a special $10B dividend in January is a watershed event. Vodafone will pass its portion along to shareholders, leading to a total dividend of $2—and a 7.5% yield—per American depositary receipt. Best of all, a big payout is likely to become an annual and growing event.

·         divesting smaller, unstrategic minority interests in France, China and some other markets

·         VOD is No. 1 or No. 2 telecom service provider in fast-growing Turkey, India and Egypt, as well as South Africa and other sub-Saharan nations. Countries like these already generate over 25% of Vodafone's Ebitda. When VZW's strong results are included, less than half of Vodafone's Ebitda comes from mature European markets.

·         Revenue from mobile data, rising at more than 20% annually, and from messaging, climbing at an 8% yearly clip, easily are outrunning the drop in voice revenue. And earnings are expected to rise about 8% in the company's next fiscal year, which starts on April 1.

·         Last week, Vodafone reported that revenue in its fiscal 2012 year's first half, ended Sept. 30, had risen 4%, to £23.5 billion, while basic earnings per share had slid 9%, to 13.06 pence (21 cents), mainly because of higher taxes and because the comparable fiscal 2011 stretch included a large extraordinary gain on the sale of China Mobile.

·         While there's no formal annual commitment, Verizon Wireless has little net debt and produces about $1 billion monthly in Ebitda. "Absent massive investment, VZW could pay out a regular annual dividend.